India’s taxation system is an evolving structure aimed at economic growth and equitable revenue distribution. With continuous reforms, the central government aims to simplify tax compliance, reduce the burden on taxpayers, and enhance ease of doing business.
In a significant move to simplify tax compliance, Finance Minister Nirmala Sitharaman had announced key changes to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) in the Union Budget 2025. These reforms, set to take effect from April 1, 2025, aim to ease the tax burden on common taxpayers and businesses by eliminating unnecessary complexities.
With these changes, taxpayers will experience a smoother process when it comes to tax deductions and collections, particularly in areas like sending money abroad, making high-value purchases, and handling business transactions. With this, the central government aims to reduce hassles and ensure a more efficient and transparent tax system.
What taxpayers need to know?
New limits of TDS: In this year’s budget, a proposal was made to rationalise TDS limits on interest earnings, rent payments, and other significant transactions. This aims to reduce frequent tax deductions, ensuring smoother cash flow and minimizing unnecessary deductions.
Relief in sending money abroad: The TCS-free limit has been raised from Rs 7 lakh to Rs 10 lakh. Whether for children’s education, family expenses, or other purposes, you can now transfer up to Rs 10 lakh abroad without incurring TCS, providing greater financial ease. Additionally, if the money is sent through an education loan, no TCS will be applicable. This brings huge relief to students studying abroad and their parents.
Good news for traders: TCS on sales exceeding Rs 50 lakh has been abolished. Starting April 1, 2025, businesses will no longer need to deduct 0.1% TCS on high-value sales. This change will improve cash flow and simplify tax compliance for traders.
No more higher TDS/TCS for non-filers: Earlier, individuals who did not file Income Tax Returns (ITR) faced higher TDS/TCS deductions. Budget 2025 proposes to remove this provision in order to provide relief to common taxpayers and small businesses from excessive tax rates.
No more jail fear for delayed TCS deposit: Earlier, failing to deposit TCS on time could lead to punishment and fines ranging from 3 months to 7 years. Budget 2025 has amended this rule, ensuring that no legal action will be taken if the pending TCS is deposited within the stipulated time.
It is to be noted here that the taxation system in India is a well-structured mechanism for revenue generation by the government to fund public welfare, infrastructure, and economic growth. It comprises direct and indirect taxes, collected by both the central and state governments. Over the years, India has undergone various tax reforms to simplify the tax structure and enhance compliance.
ALSO READ: ITR filing under new income tax regime: These 3 deductions may help you save money, maximise savings
