TDS rules from April 1: What’s new for seniors, general taxpayers in interest, rent & dividends

From April 1, 2025, there have been a couple of changes in the Tax Deducted at Source (TDS) ecosystem. The updated rules will affect interest, dividends, rent, and commissions, among other forms of income. 

In order to improve cash flow and lessen the tax burden on individuals, Finance Minister Nirmala Sitharaman raised the TDS level in a number of categories in the Union Budget 2025. Professionals who receive commissions, small investors, and senior citizens will benefit from these reforms.

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TDS for senior citizens

The threshold TDS limit has been doubled for senior citizens from April 1, 2025. The interest income from fixed deposits (FDs), recurring deposits (RDs), etc., will only be subject to deduction if the amount, at the aggregate level in a bank, exceeds Rs 1 lakh in a financial year for senior citizens. This means if a senior citizen keeps his/her interest income below Rs 1 lakh, then the bank will not cut any TDS.

TDS threshold for general citizens

For non-senior citizens (general citizens), the government has increased the TDS threshold for interest income from Rs 40,000 to Rs 50,000, effective April 2025. The move aims to reduce the tax burden on depositors, particularly those relying on FD interest as a primary source of income. As per the revised rules, the bank will deduct TDS if the aggregate annual interest amount crosses Rs 50,000. However, the bank will not deduct any TDS if a general citizen keeps his/her interest income within the limit of Rs 50,000.

TDS on rent

Now, TDS on house rent paid has to be deducted from the rent payment if the rent payment is Rs 50,000 per month or part of a month or more. Earlier this threshold was applicable if the rent payment exceeded Rs 2.4 lakh per annum. This threshold limit was Rs 1,80,000 until FY 2018-19. The amendment will take effect from April 1, 2025.

TDS under Section 194IB

Section 194IB of the Income Tax Act applies to individuals or Hindu Undivided Families (HUF) who are not subject to audit. If a tenant pays rent exceeding rs 50,000 per month or Rs 6,00,000 annually to a landlord, they must deduct Tax Deducted at Source (TDS) as per the applicable rates.

Until September 2024, the TDS rate under this section was 5%, which was reduced to 2% starting October 1, 2024.

If you are a salaried individual making monthly rent payments exceeding Rs 50,000, it is essential to deduct TDS at the specified rate and remit the same to the Income-tax Department promptly.

TDS under Section 194I

Section 194I applies to entities (excluding individuals or HUFs not liable for audit) making rental payments exceeding the specified threshold. Companies, partnerships, trusts, or any other entity must withhold TDS under this provision. Individuals or HUFs subject to audit are also covered under this section.

Rent covered under this provision includes payments for house, land, machinery, buildings (including factory buildings), offices, furniture, equipment, fittings, etc. The TDS rates applicable are 2% for rent on plant and machinery, and 10% for rent on land, buildings, or furniture.

Previously, TDS deduction was mandatory for annual rents exceeding Rs 2.4 lakh until FY 2024-25. However, starting from FY 2025-26, the threshold has been raised. Now, TDS will be obligatory under Section 194I if the annual rent exceeds Rs 6 lakh (or Rs 50,000 per month).

TDS on MFs or stocks

Investors in mutual funds (MFs) or stocks will gain from the increase in the exemption limit from Rs 5,000 to Rs 10,000 on dividends and income earned from MF units or specific companies.

Threshold hiked to Rs 10,000 for TDS on dividend
The Budget has also raised the dividend tax deduction threshold limit from Rs 5,000 to Rs 10,000. Starting April 1, 2025, the new limit will allow equities and MF investors to keep more money in their hands, as tax will be deducted at source when dividend income exceeds Rs 10,000.

Higher TDS threshold for insurance and brokerage commissions
The Budget 2025 has also raised the TDS threshold for various commissions, providing relief to insurance agents and brokers. The TDS threshold for insurance commission has been increased from Rs 15,000 to Rs 20,000, effective from 1 April 2025. These changes aim to ease the compliance burden and ensure better cash flow for small earners in these sectors.