Tax Deducted at Source (TDS) plays a crucial role in India’s taxation system, ensuring tax collection at the point of income generation. The new TDS rates, effective from April 1, 2025, have been updated to streamline tax compliance and improve transparency. Here’s an in-depth look at the latest TDS rates and their impact on taxpayers.

Key Changes in TDS Rates for FY 2025-26

The updated TDS rate chart includes several changes across various income categories. Below are some of the significant updates:

1. Salary Income (Section 192)
   • Employers will continue to deduct TDS based on the applicable income tax slab rates for salaried employees.
2. Interest on Securities (Section 193)
   • TDS on interest paid on securities remains at 10%, applicable if the interest amount exceeds the specified threshold.
3. Dividends (Section 194)
   • A TDS rate of 10% is applicable on dividends paid by companies to resident shareholders if the amount exceeds ₹5,000 in a financial year.
4. Contractual Payments (Section 194C)
   • Individual/HUF: 1%
   • Others (e.g., companies, partnerships): 2%
   • Applies if the payment exceeds ₹30,000 per contract or ₹1,00,000 in a year.
5. Rent Payments (Section 194I)
   • Land/Building/Furniture: 10%
   • Plant/Machinery/Equipment: 2%
   • TDS is deducted if the rent exceeds ₹2,40,000 annually.
6. Professional and Technical Fees (Section 194J)
   • Professional Services: 10%
   • Technical Services: 2%
   • No deduction if the payment is below ₹30,000 in a financial year.
7. Purchase of Goods (Section 194Q)
   • A buyer whose turnover exceeds ₹10 crores in the previous year must deduct 0.1% TDS on purchases exceeding ₹50 lakhs.
8. Cash Withdrawals (Section 194N)
   • 2% TDS on cash withdrawals above ₹1 crore from banks.

Impact of New TDS Rates

• Higher Compliance: Businesses must ensure timely TDS deduction and deposit to avoid penalties.
• Cash Flow Management: Companies dealing with high-volume transactions should plan their cash flows to minimize the impact of TDS deductions.
• Investors & Renters: Individuals receiving dividends or rental income should be aware of deductions and adjust their financial planning accordingly.

Conclusion

With the updated TDS rates taking effect from April 1, 2025, businesses and individuals should review their transactions to ensure compliance. Staying informed about tax changes can help optimize financial planning and avoid unnecessary deductions or penalties.