Along with major relief on personal income tax, Union Finance Minister Nirmala Sitharaman announced several other changes in direct taxes to provide relief to the common man. These include changes to tax deducted at source (TDS) and tax collected at source (TCS) provisions.
Relief for senior citizens
The TDS threshold on interest payouts for senior citizens has been raised to Rs 1 lakh from Rs 50,000. “The increase in the limit for TDS on interest to Rs 1 lakh will ensure greater cash flow in the hands of senior citizens, providing them with greater financial cushion,” says Sandeep Sehgal, partner-tax, AKM Global, a tax and consulting firm.
“Increasing the withholding tax will leave a larger disposable income in their hands, rather than them having to wait for the refund of taxes paid,” says Manoj Purohit, partner, FS tax, tax and regulatory services, BDO India.
Tax exemption has also been granted for withdrawals from National Savings Schemes (NSS) by senior citizens holding old accounts where interest is no longer payable, provided withdrawals are made after August 29, 2024.
TDS changes for other residents
The TDS threshold on interest payouts for other resident individuals has also been increased to Rs 50,000 from Rs 40,000. The TDS threshold on dividends from mutual funds has been increased to Rs 10,000 from Rs 5,000. These changes will put more money in the hands of small investors.
“Simplifying and rationalising TDS/TCS provisions have long been a long-standing demand. The proposal to increase thresholds for the applicability of various TDS provisions is a welcome relief, though I feel that the threshold should have been raised even more,” says Vishwas Panjiar, partner, Nangia Andersen LLP.
Easing burden on remittances
The TCS limit for remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) has been raised to Rs 10 lakh from Rs 7 lakh. TCS has also been removed for remittances made for foreign education if funded by loans from specified financial institutions.
“The raising of the TCS limit for LRS transactions from Rs 7 lakh to Rs 10 lakh aims to lighten the compliance burden for taxpayers. Moreover, by removing TCS on remittances for education purposes funded through loans from specified financial institutions, the government is offering substantial relief to students and their families,” says Avnish Arora, executive director, direct tax, Forvis Mazars in India.
“Under LRS, the TCS rate for education and medical purposes is already lower at 5 per cent compared to 20 per cent for other purposes. However, remittances funded through education loans attracted a 0.5 per cent TCS, which has now been abolished. This will certainly provide relief to people studying abroad,” says Sehgal.
Extended timeline for updated returns
Taxpayers can now file updated returns for four years, instead of the previous two.
The FM also clarified that withdrawals from NPS Vatsalya will be granted the same tax exemptions as those from the National Pension System (NPS). Contributions to NPS Vatsalya are also eligible for deductions under Section 80CCD(1B), aligning it with standard NPS accounts.
Key Changes in TDS and TCS Provisions
- Threshold for TDS on interest payouts to senior citizens raised to Rs 1 lakh from Rs 50,000
- TDS threshold on interest payouts for other resident individuals increased to Rs 50,000 from Rs 40,000
- TDS threshold on dividends paid by mutual fund schemes raised to Rs 10,000 from Rs 5,000
- TCS limit for overseas remittances under the Liberalised Remittance Scheme (LRS) increased to Rs 10 lakh from Rs 7 lakh.
- TCS has been removed for remittances made for foreign educational purposes if the remittance is funded by a loan from a specified financial institution.
 "More disposable income in hands: TDS threshold for senior citizens doubled")
