Unraveling the Impact: Understanding the New TDS Provisions from 01.04.25 on Your Business

As businesses prepare for significant changes in taxation policies, one of the biggest updates is the new Tax Deducted at Source (TDS) provisions taking effect on April 1, 2025. Changes in thresholds and rationalization has been made to ensure better and easier compliance to all stakeholders. Grasping how these changes can influence your operations is crucial for effective planning and management.

What are the impacted TDS Provisions?

Specific payments made by businesses, such as those for professional services, commission, purchase of goods and rental expenses will see adjustments in TDS rates and thresholds. For instance, if previously the TDS threshold on professional fees was INR 30,000, businesses have to now deduct tax on payment equal to or exceeding INR 50,000 starting April 2025. Other key change pertains to rationalization of TDS and TCS on purchase of goods, where TCS related provisions has been omitted. (Complete list of affected TDS sections provided at the end)

Familiarizing yourself with these revised rates & thresholds is essential to avoid penalties for non-compliance.

Impact on Cash Flow Management

The increase in TDS thresholds and simplification means businesses will have the flexibility to manage their cash flow effectively. The burden of compliance on smaller transactions will be reduced thus enabling businesses to focus better on their core activities.

Preparing for Change

The new TDS provisions set to begin on April 1, 2025, presents opportunities for businesses. By understanding the implications, adjusting financial strategies, and strengthening administrative protocols, companies can effectively navigate these changes.

Stay informed and prepared—doing so will be vital for all businesses as they transition to this updated tax landscape.

Section	Applicable to	Threshold	Rate
193	Interest on Securities	INR 10,000	10%
194	Dividends	INR 10,000	10%
194A	Interest on other than securities	INR 10,000 on interest from non financial institution INR 50,000/INR 1,00,000 on interest from financial institution	10%
194B & 194BB	Winnings from lottery and horse race	INR 10,000 per transaction	30%
194D	Insurance commission	INR 20,000	5%/10% for domestic company
194DA	Receipts from Life Insurance Policy	INR 1,00,000	2%
194G	Commission on lottery tickets	INR 20,000	2%
194H	Brokerage or Commission	INR 20,000	2%
194I	Rent	INR 50,000 per month	2% (Machinery) /10% (Building)
194IB	Payment of rent by certain assessees not liable to tax audit	INR 50,000 per month	2%
194J	Fees for professional or technical services	INR 50,000	2%/10%
194K	MF dividend	INR 10,000	10%
194LA	Compensation on acquisition of certain immovable property	INR 5,00,000	10%
194M	Payment made for Contracts, Brokerage or Professional Fees by specified individual & HUF	INR 50,00,000	2%
194O	E Commerce participants	INR 5,00,000	0.1%
194T	Payments by Firm to partners	INR 20,000	10%

For assistance in filing or further inquiries, please contact at karthik.guptha.r@kgacca.com or fill the form at the bottom of the page.