New TDS TCS Rules 2025: New Limits, Removed Sections & Complete Guide for

Are you still calculating TDS and TCS using last year's numbers? Stop right there. The new TDS TCS rules took effect from 1 April 2025. And they rewrite the deduction. Collection, and reporting playbook for every banker and taxpayer in India.

This guide breaks down each change in plain English. You get the revised limits. The sections that were scrapped, and a clear old-vs-new table.

By the end. You will know exactly what to deduct. What to skip, and what your exam will test.

Why the New TDS & TCS Rules Matter in 2025

TDS (Tax Deducted at Source). TCS (Tax Collected at Source) are the backbone of India's pay-as-you-earn tax system. Banks act as the government's collection arm. So even one outdated setting in your core banking software can trigger wrong deductions.

For bankers, this is not just compliance. These updates appear directly in your promotion and certification papers. They are high-yield topics for the JAIIB and CAIIB exams and for bank promotion tests.

The government's stated goal is simple: simplify, streamline, and strengthen transparency. Fewer thresholds. Fewer special rates. Less confusion at the branch counter.

TDS vs TCS: The Core Difference

Before the changes, lock in the basics. Many candidates lose easy marks by mixing these two up.

What Changes From 1 April 2025? A Quick Overview

FY 2025-26 brings a cluster of amendments. Some raise thresholds to give small savers relief. Others delete entire compliance sections that bankers found painful.

Here is the headline list. We unpack each one below.

• Higher TDS exemption on interest income under Section 194A.
• A much higher rent threshold under Section 194I.
• A new Section 194T for payments to partners.
• Removal of Sections 206AB and 206CCA (higher rates for non-filers).
• Relaxed TCS on overseas remittances under LRS.
• Removal of Section 206C(1H) on sale of goods.
• An extended correction window for old TDS/TCS statements.

1. Interest Income Threshold Revised (Section 194A)

This is the change your fixed-deposit customers will notice first. The TDS exemption limit on interest paid by banks has gone up sharply.

• Senior citizens: interest up to Rs 1,00,000 per financial year is exempt from TDS.
• Other depositors: interest up to Rs 50,000 per financial year is exempt from TDS.

Example. A senior citizen earns Rs 85,000 as FD interest in a year. Under the new rule. The bank deducts no TDS, because it falls under the Rs 1,00,000 limit.

This reduces unnecessary Form 15G/15H paperwork and refund claims. It is a clear win for retail customers.

2. TDS on Rent Gets a Big Relief (Section 194I)

The rent threshold has been redefined on a monthly basis. TDS now applies only when rent exceeds Rs 50,000 per month.

In annual terms. Rent up to Rs 6,00,000 per year is fully outside the TDS net. That is a major jump from the earlier annual limit.

Individuals and small businesses renting commercial or residential property gain the most. Fewer tenants need to deduct and deposit tax every month.

3. New Section 194T: TDS on Payments to Partners

This is the headline addition for FY 2025-26. For the first time. Partnership firms. LLPs must deduct TDS on payments to their own partners.

Under Section 194T, a firm deducts 10% TDS on partner payments such as:

• Remuneration or salary
• Commission or bonus
• Interest on capital or loan accounts

The aim is transparency. Partnership income, long under-reported, now leaves a clear paper trail. Confirm the exact payment threshold for 194T on the latest official notification before you configure it.

4. Sections 206AB and 206CCA Removed

Bankers, this is the relief you wanted. The dreaded higher-rate sections for non-filers are gone.

Earlier. If a customer had not filed their income-tax return. You had to apply a higher TDS or TCS rate under Sections 206AB. 206CCA. That meant constant compliance checks against the filer database.

Both sections are now removed. A uniform rate applies to all taxpayers, filer or not. Branch staff, employers, and deductors face far less verification work.

5. TCS on Overseas Remittances and Education Loans

The Liberalised Remittance Scheme (LRS) threshold has been raised. The limit for TCS-free remittance moves from Rs 7 lakh to Rs 10 lakh.

No TCS applies on remittances up to this higher limit. Families funding travel, gifts, or investments abroad get more headroom.

There is also direct relief for students. Remittances made for education funded by a loan from a financial institution are now exempt from TCS. Always confirm the exact rate slabs on the latest official IIBF notification. As remittance rules change often.

6. Sale of Goods TCS Removed (Section 206C(1H))

Section 206C(1H) created friction for sellers. It required collecting 0.1% TCS on the sale of goods above Rs 50 lakh in a year.

This section is now completely removed. Sellers no longer track buyer-wise turnover for this purpose. The buyer-side TDS provisions handle the same transactions. So the overlap is cleaned up.

7. TDS/TCS Correction Deadline Extended

Made a reporting error in an old return? You now have a real chance to fix it.

Taxpayers can revise or correct old TDS/TCS statements from FY 2018-19 (Q4) to FY 2023-24 (Q3) until 31 March 2026. This is a golden window for banks. Institutions to clear legacy mismatches.

Use it to fix wrong PANs. Challan mismatches, and missed entries before the door closes.

8. Advance Tax Rules and Installment Deadlines

Advance tax rules continue alongside the TDS changes. If your total tax liability exceeds Rs 10,000 in a year. Advance tax is mandatory.

The installment schedule remains familiar:

1. By 15 June – 15% of total tax
2. By 15 September – 45% (cumulative)
3. By 15 December – 75% (cumulative)
4. By 15 March – 100%

Senior citizens without business income stay exempt from advance tax. That exemption is unchanged.

Old vs New Limits: The Complete Comparison Table

This single table is the most exam-friendly part of the new TDS TCS rules. Memorise it.

How to Study These TDS & TCS Changes for Your Exam

Tax topics feel heavy, but a smart method makes them easy marks. Follow this simple plan.

1. Learn the table first. Examiners love old-vs-new comparisons. The eight rows above cover most objective questions.
2. Tie each rule to a section number. 194A is interest. 194I is rent. 194T is partners. Section numbers are frequent one-mark questions.
3. Remember what was removed. 206AB, 206CCA and 206C(1H) are gone. "Removed" answers are common traps for unprepared candidates.
4. Practise short numericals. Use the FD interest and rent examples to solve quick calculation questions.
5. Test yourself. Attempt our mock tests to lock the figures into long-term memory before exam day.

Pair this reading with our free guides on banking and finance topics for fuller coverage.

Common Mistakes to Avoid

These slip-ups cost marks in exams. Cause compliance errors at the branch. Watch out for all of them.

• Using old thresholds. Applying the Rs 10,000 interest limit instead of Rs 50,000 is the most common error.
• Still checking non-filer status. Sections 206AB and 206CCA are gone. So the higher-rate logic no longer applies.
• Ignoring Section 194T. Firms that forget to deduct on partner payments will face notices.
• Confusing TDS with TCS. Remember: deduction on payments, collection on receipts.
• Treating figures as permanent. Tax limits change yearly. Always confirm on the latest official IIBF notification and the Income-tax portal.

Frequently Asked Questions (FAQ)

When do the new TDS and TCS rules come into effect?

The new TDS TCS rules apply from 1 April 2025. Covering the financial year 2025-26. Deductions. Collections from that date must follow the revised limits and sections.

What is the new TDS limit on FD interest for senior citizens?

For senior citizens. Interest income up to Rs 1,00,000 per financial year is now exempt from TDS under Section 194A. For other depositors, the exempt limit is Rs 50,000.

What is Section 194T?

Section 194T is a new provision from April 2025. It requires partnership firms. LLPs to deduct 10% TDS on payments to partners. Such as remuneration, commission, and interest. Confirm the exact threshold on the latest official notification.

Are Sections 206AB and 206CCA still applicable?

No. Both sections. Which imposed higher TDS/TCS rates on non-filers of income-tax returns. Are removed from FY 2025-26. A uniform rate now applies to all taxpayers.

What is the new TCS limit under LRS?

The TCS-free threshold under the Liberalised Remittance Scheme rises from Rs 7 lakh to Rs 10 lakh. Remittances for education funded by an institutional loan are also exempt from TCS.

Conclusion: Relief and Clarity for Bankers

The new TDS TCS rules from 1 April 2025 do exactly what the government promised. They raise limits, scrap clutter, and add transparency where it was missing.

For you as a banker or finance professional, the message is simple. Update your software. Learn the new table, and stop applying the old non-filer rules.

For exams. This is a high-scoring chapter if you master the section numbers. The comparison table.

Stay updated, study smart, and walk into your next paper with confidence.

Related Guides

For more on new TDS TCS rules. See the official IIBF circulars. Our chapter-wise free notes on iibf.store.

For more on “new TDS TCS rules”, explore our free mock tests and chapter notes on iibf.store.

Bookmark this page — we keep our “new TDS TCS rules” guidance current as IIBF revises its rules.