New TDS Rules September 2025: Government Hikes Exemption Limits to Ease Tax Burden

The Government of India made substantial revisions in Tax Deducted at Source (TDS) regulations effective from September 25, 2025, with the intent to simplify the tax compliance burden, enhance liquidity for taxpayers, and streamline procedures. 

These reforms especially favor senior citizens, middle-class individuals, small investors, and part-time agents by raising exemption limits and harmonizing TDS provisions.

Major TDS Threshold Changes (Effective April 1, 2025, Some effective Sept 25, 2025)

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Principal Highlights of the New TDS Regulations

Increased Exemption Limits for Senior Citizens and Others

• The limit of annual interest exemption for TDS on deposits has been doubled for senior citizens, which is now ₹1,00,000 from ₹50,000. Hence, no TDS will be deducted if the senior citizen's annual interest income from bank deposits and other sources does not exceed ₹1 lakh.

• For others, the limit of exemption of interest on recurring deposits and fixed deposits has been raised from ₹40,000 to ₹50,000, which provides more liquidity in hand.

• Dividend income exemption has also doubled to ₹10,000 from ₹5,000, thus encouraging small investors to remain invested in mutual funds and equities.

Adjusted TDS Limits on Different Payments

• Winnings from Lotteries: TDS now only applies if a single win is more than ₹10,000. Previously, TDS was levied on overall annual winnings, which was taking a toll on frequent small-ticket winners.

• Commissions on Insurance: The TDS limit rose from ₹15,000 to ₹20,000, aiding small and part-time agents.

• Commission and Brokerage: Threshold amounts for deduction of TDS have been increased similarly, relieving burden on low earners in commission-oriented jobs.

Introduction of New TDS Section

Payments to partners such as remuneration, interest, or commission above ₹20,000 in a financial year invite TDS at 10% under Section 194T from FY 2025-26. This addresses transparency and tax adherence in partnership firms.

Elimination of Higher TDS for Non-Filers

Provisions 206AB and 206CCA, that charged higher TDS rates to non-filers of returns, have been repealed from the date of April 1, 2025. It makes it easier to comply, as companies are not required to ensure return filing status prior to deduction of TDS.

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How to Prepare and Comply

Taxpayers should keep their sources of income under close observation to take advantage of increased exemption limits and ensure no unnecessary TDS deductions. Financial institutions and businesses need to overhaul their TDS deduction mechanisms to adhere to altered thresholds. Maintaining an eye on these changes will minimize refund claims and simplify tax filing burdens.

By simplifying the TDS regime and making it more taxpayer-friendly, the government hopes to promote formal investment and savings while at the same time facilitating efficient tax collection.