Finance Minister Nirmala Sitharaman’s Budget 2025 brings some important changes to the Tax Deducted at Source (TDS) rules. The government has proposed increased thresholds for TDS under various sections. These changes aim to reduce the compliance burden, especially for small taxpayers.

Here’s an overview of the proposed revisions to TDS thresholds across different payers.

TDS threshold for banking companies

Currently, TDS is required when interest payments by a banking company exceed ₹40,000 annually. The proposed increase in this threshold will raise the limit to ₹50,000.

For senior citizens, the current threshold stands at ₹50,000, but it will increase to ₹1 lakh under the new proposal.

This change will benefit senior citizens by allowing them to earn more interest income without the need for TDS deduction.

TDS threshold for cooperative societies

The TDS threshold for a co-operative society engaged in banking will also rise from ₹40,000 to ₹50,000, bringing it in line with other banking institutions.

For senior citizens, the limit will increase from ₹50,000 to ₹1 lakh.

TDS on post office deposits

TDS on deposits with post offices under any government scheme currently kicks in after ₹40,000. The proposed threshold will raise this limit to ₹50,000, benefitting small depositors.

For senior citizens, this will go up from ₹50,000 to ₹1 lakh

TDS for other cases

For cases other than banking and post office deposits, the TDS threshold is currently ₹5,000. The proposed increase will raise this amount to ₹10,000.

This will reduce the number of taxpayers who have to deal with TDS, especially for small payments where TDS previously applied at a lower threshold.

TDS for specific co-operative societies

For co-operative societies mentioned under Section 194A, the TDS threshold will also rise from ₹40,000 to ₹50,000. As with other categories, senior citizens will see an increase from ₹50,000 to ₹1 lakh.

Why these changes matter

The increase in TDS thresholds is part of the government’s effort to ease the tax burden on small taxpayers. This change is significant for senior citizens, who often depend on interest income from banks, post offices, and co-operative societies.

Naveen Wadhwa, Vice President, Taxmann, said, “The Finance Minister recognised the significance of consumption in our economy. By reducing the threshold for TDS and lowering tax rates, the government is giving more money to individual taxpayers.”

These revisions are set to take effect from April 1, 2025, and will apply for the assessment year 2025-26.