New TDS Sections Applicable from July 1, 2025 – What CAs Must Know
New TDS Sections Applicable from July 1, 2025 – What CAs Must Know
1. Introduction of Section 194T: TDS on Partner's Remuneration
A new section, 194T, has been inserted, mandating a 10% TDS on the remuneration paid to partners by a partnership firm.
Professional Insight: Firms must update their accounting systems to deduct TDS on partner remuneration and ensure timely deposit and reporting.
2. Revised Thresholds for TDS on Various Payments
The Finance Act, 2025, has revised the threshold limits for TDS deductions to reduce the compliance burden on small taxpayers.
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Interest on Securities (Section 193): Threshold increased from ₹5,000 to ₹10,000.
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Interest other than Securities (Section 194A): Threshold increased from ₹10,000 to ₹50,000 for senior citizens.
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Rent (Section 194I): Threshold increased from ₹2.4 lakhs to ₹6 lakhs per annum.
Professional Insight: These changes necessitate a review of client payment structures to ensure compliance with the new thresholds.
3. Introduction of Section 395: Replacement of Nil TDS Certificates
The new Income Tax Bill, 2025, introduces Section 395, replacing the existing provisions for obtaining nil TDS certificates.
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Key Change: Taxpayers can now only apply for a lower TDS rate certificate; the option for a nil TDS certificate has been removed.
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Applicability: All taxpayers, including NRIs.
Professional Insight: This change requires taxpayers to plan their cash flows accordingly, as some amount of tax will be deducted at source, even if their total income is below the taxable limit.
4. Enhanced Penalties for TDS Non-Compliance
To enforce stricter compliance, the penalties for TDS defaults have been increased.
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Late Filing Fee (Section 234E): ₹200 per day until the return is filed.
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Penalty (Section 271H): Minimum ₹10,000, which may extend up to ₹1,00,000.
Professional Insight: Timely filing of TDS returns is crucial to avoid hefty penalties. Implementing reminder systems and regular audits can help maintain compliance.
5. Revised TDS Rates on Insurance Commission
The TDS rate on insurance commission under Section 194D has been reduced.
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Previous Rate: 5%
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New Rate: 2%
Professional Insight: Insurance companies and agents must adjust their systems to reflect the new TDS rate to ensure accurate deductions.
6. Mandatory TAN e-KYC for High-Value Deductors
The Central Board of Direct Taxes (CBDT) has mandated e-KYC verification for TAN holders with significant TDS liabilities.
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Applicability: Deductors with annual TDS liability exceeding ₹50 lakhs.
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Deadline: September 30, 2025.
Professional Insight: Non-compliance may lead to deactivation of TAN, affecting the ability to deduct and deposit TDS. Ensure clients complete e-KYC within the stipulated timeframe.
Conclusion
The amendments effective from July 1, 2025, signify the government's intent to streamline tax collection and enhance compliance. Professionals must proactively adapt to these changes, ensuring clients are informed and systems are updated to reflect the new provisions.