TDS and TCS Rates FY 2025-26 cover the latest threshold limits and applicable deduction/collection rates for rent, interest, dividends, partners’ payments, and LRS transactions.
The TDS (Tax Deducted at Source) and TCS ( Tax collected at Source )rules for FY 2025-26 (Assessment Year 2026-27) have seen significant “rationalisation” aimed at reducing the compliance burden for small taxpayers and increasing cash flow.
The Article on ” TAX PLANNING FOR FY 2025-26 CONTAINS 11 PARTS
PART I: MAJOR CHANGES IN TAX RULES FOR FY 2025-26
PART 2 : TAX SLABS /RATES FOR FY 2025-26
PART 3 : TAX REBATES FOR FY 25-26
PART 4 : CAPITAL GAIN TAX FOR FY 2025-26
PART 5 : TAX ON SALE OF RESIDENTIAL PROPERTY
PART 8 : INCOME TAX CALCULATOR FOR FY 2025-26
PART 9 : TAX ON RETIREMENT BENEFITS FOR FY 2025-26
PART 10 : HOW TO PAY INCOME TAX ONLINE?
PART 11 : TO KNOW ALL ABOUT TDS RATES ,
ALL ABOUT TDS RATES – READ BELOW
TDS RATES FOR FY 2025-26
1. The “Big Four” Changes (Threshold Hikes) for FY 2025-26
The Budget 2025 significantly raised the limits below which no tax will be deducted:
- Rent (Section 194-I): The annual threshold for TDS on rent has been increased from ₹2.4 Lakh to ₹6 Lakh. This is a massive relief for small landlords.
- Bank Interest (Section 194A): * For Senior Citizens, the limit is doubled to ₹1,00,000 (from ₹50,000).
- For others, the limit is now ₹50,000 (from ₹40,000).
- Dividends (Section 194): The threshold for TDS on dividends and mutual fund income has increased from ₹5,000 to ₹10,000.
- Insurance Commission (Section 194D): The TDS rate has been slashed from 5% to 2%, and the threshold has increased to ₹20,000
2. New Section: TDS on Payments to Partners (Sec 194T)
Effective from April 1, 2025, a new rule applies to Partnership Firms and LLPs.
- Firms must now deduct 10% TDS on any salary, bonus, commission, or interest paid to a partner if the total amount exceeds ₹20,000 in a financial year.
3. TDS Rate Chart for FY 2025-26 (Common Categories)
| Section | Nature of Payment | Threshold | TDS Rate |
| 192 | Salary | Basic Exemption Limit | Slab Rates |
| 194A | Interest (Banks/Post Office) | ₹50k (₹1L for Seniors) | 10% |
| 194 | Dividends | ₹10,000 | 10% |
| 194-I | Rent (Land/Building) | ₹6,00,000 | 10% |
| 194-IA | Sale of Property | ₹50 Lakh | 1% |
| 194J | Professional Fees | ₹30,000 | 10% |
| 194J | Technical Fees / Royalties | ₹30,000 | 2% |
| 194B | Lottery/Game Show Winnings | ₹10,000 per winning | 30% |
| 194BA | Online Gaming Winnings | No limit (on net winnings) | 30% |
| 194Q | Purchase of Goods (> ₹50L) | ₹50 Lakh | 0.1% |
4. Other Updates
- Section 206AB Removed: You no longer need to verify if the person you are paying has filed their last year’s ITR to decide the TDS rate. The “double rate for non-filers” rule has been scrapped to simplify things.
- Lottery Winnings: TDS is now applicable on individual winnings exceeding ₹10,000, rather than the aggregate winnings of the whole year. This prevents TDS on multiple small prizes.
- TCS on LRS: The threshold for Tax Collected at Source (TCS) on foreign remittances (under LRS) has been increased from ₹7 Lakh to ₹10 Lakh (except for education and medical purposes).
TCS RATES FOR FY 2025-26
For FY 2025-26 (Assessment Year 2026-27), the Tax Collected at Source (TCS) rules have been significantly simplified to reduce the burden on middle-class taxpayers and businesses.
The most important change is the unification of the threshold limit at ₹10 Lakh for most transactions.
1. Key Changes in TCS (Budget 2025 Updates)
- Threshold Increase: The threshold for TCS on LRS (Liberalised Remittance Scheme) has been raised from ₹7 Lakh to ₹10 Lakh.
- Overseas Tour Packages: The 5% rate now applies to bookings up to ₹10 Lakh (previously ₹7 Lakh). Beyond this, the rate is 20%.
- Abolition of TCS on Sale of Goods: Section 206C(1H), which required a 0.1% TCS on the sale of goods exceeding ₹50 Lakh, has been abolished to improve business cash flow.
- No Penalty for Non-Filers: Sections 206AB and 206CCA (which imposed higher TDS/TCS for people who hadn’t filed ITRs) have been omitted. You no longer need to check the filing status of your customers/payees.
- Decriminalization: The fear of prosecution (jail time) for delayed TCS deposits has been removed, provided the tax is paid before the quarterly statement is filed
2. TCS Rate Chart for FY 2025-26
| Type of Transaction | Threshold (per FY) | TCS Rate |
| Education (Funded via Loan u/s 80E) | Any amount | Nil (Exempt) |
| Education (Self-funded) / Medical | Up to ₹10 Lakh | Nil |
| Above ₹10 Lakh | 5% | |
| Overseas Tour Packages | Up to ₹10 Lakh | 5% |
| Above ₹10 Lakh | 20% | |
| Any other LRS (Investments, Gifts) | Up to ₹10 Lakh | Nil |
| Above ₹10 Lakh | 20% | |
| Sale of Motor Vehicle | Above ₹10 Lakh | 1% |
| Sale of Scrap / Timber | No limit | 1% to 2.5% |
Credit Card Exception: International credit card spending while traveling abroad is still not covered under the LRS limit for now. This means no TCS applies to such spends, unlike debit or forex card transactions
THIS ARTICLE CARRIES INFORMATION ON VARIOUS TAX PROVISIONS WHICH ARE GENERALLY USEFUL .YET IT DOES NOT CARRY ALL THE PROVISIONS AND HENCE YOU ARE ADVISED TO GO THROUGH INCOME TAX DEPARTMENT WEBSITES FOR AUTHENTIC COMPLETE INFORMATION , ESPECIALLY FOR THOSE WHO HAVE GOT MULTIPLE STREAMS OF INCOME OR COMPLEX INVESTMENTS . YOU MAY ALSO CONSULT A QUALIFIED TAX CONSULTANT / CHARTERED ACCOUNTANT FOR ANY CLARIFICATION. READERS ARE ALSO WELCOME TO SEND FEEDBACK , FORM AVAILABLE BELOW . WE ARE OPEN FOR CORRECTION IF NEEDED