TDS and TCS Threshold Changes from 1 April 2025: What Small Businesses Must Update
The Finance Act, 2025 raised TDS thresholds on rent, commission, professional fees, interest and dividend, removed TCS on the sale of goods, and lifted the TCS limit on foreign remittance. Here is the section-by-section before-and-after for FY 2025-26.
- Rent (Section 194I) threshold jumped from ₹2.4 lakh/year to ₹6 lakh/year (₹50,000/month), effective 1 April 2025.
- TCS on sale of goods (Section 206C(1H)) was removed entirely from 1 April 2025 — sellers no longer collect it.
- New Section 194T means firms and LLPs must deduct 10% TDS on partner remuneration and interest above ₹20,000/year.

If you deduct TDS on rent, commission, professional fees, or interest, several of your thresholds went up on 1 April 2025 — which means fewer small payments now trigger a deduction. The Finance Act, 2025 raised TDS limits across half a dozen sections, removed TCS on the sale of goods entirely, and lifted the TCS threshold on foreign remittances (ClearTax, 2025). Here is the before-and-after, section by section.
- Rent (Section 194I) threshold jumped from ₹2.4 lakh/year to ₹6 lakh/year (₹50,000/month), effective 1 April 2025.
- TCS on sale of goods (Section 206C(1H)) was removed entirely from 1 April 2025 — sellers no longer collect it.
- TCS on foreign remittance under LRS rose from ₹7 lakh to ₹10 lakh; TCS on education-loan remittances was scrapped.
- New Section 194T means firms and LLPs must deduct 10% TDS on partner remuneration and interest above ₹20,000/year.
Which TDS thresholds went up?
Six common deduction thresholds were raised so routine small payments stop triggering TDS (TaxGuru, 2025). The biggest jump is rent: a landlord paid up to ₹6 lakh a year now sees no TDS at all, where the old cut-off was ₹2.4 lakh. For a small business renting an office or shop, that often removes the TDS obligation outright.
What happened to TCS on the sale of goods?
Section 206C(1H) — the 0.1% TCS that sellers with turnover above ₹10 crore collected on sales above ₹50 lakh to a buyer — was omitted from 1 April 2025 (TaxGuru, 2025). It overlapped with Section 194Q (TDS on purchase of goods, which stays), so removing it cuts duplicate compliance. If you were collecting this TCS, stop — but keep deducting under 194Q where it applies.
Did the foreign remittance (TCS) limit change?
Yes. The TCS threshold on remittances under the Liberalised Remittance Scheme and on overseas tour packages rose from ₹7 lakh to ₹10 lakh, and TCS on remittances for education funded by an education loan was removed entirely (AU Small Finance Bank, 2025). If you send money abroad for a child's education, a family trip, or investments, more of it now flows without upfront tax collection.
What is the new Section 194T?
Section 194T is genuinely new for partnership firms and LLPs: from 1 April 2025 they must deduct 10% TDS on remuneration, salary, commission, bonus, or interest paid to a partner once the aggregate crosses ₹20,000 in a financial year (ClearTax, 2025). Once the threshold is crossed, TDS applies to the whole amount, not just the excess. A partner's share of profit (exempt under Section 10(2A)) and capital drawings are outside its scope. (Section 194T was inserted by the Finance (No. 2) Act, 2024 and became effective 1 April 2025.)
Frequently Asked Questions
I pay ₹45,000 a month as office rent. Do I still deduct TDS?
Under the new Section 194I threshold of ₹6,00,000 per year (₹50,000 per month) effective 1 April 2025, rent of ₹45,000 a month — ₹5,40,000 a year — falls below the limit, so no TDS is required. Under the old ₹2.4 lakh threshold you would have had to deduct. Always confirm the annual total against the ₹6 lakh ceiling.
Do I still collect TCS on goods I sell above ₹50 lakh?
No. Section 206C(1H), the TCS on sale of goods, was omitted from 1 April 2025. Sellers no longer collect it. However, if your buyer is liable to deduct TDS on the purchase under Section 194Q, that obligation continues, so coordinate with large buyers on who is deducting.
My firm pays partners a monthly remuneration. What do we do now?
From 1 April 2025, deduct 10% TDS under Section 194T once the total remuneration, interest, bonus, or commission paid to a partner crosses ₹20,000 in the year. Get the firm a TAN if it does not have one, deduct on crossing the threshold, and deposit and report the TDS like any other deduction.
Did the professional fees TDS threshold change?
Yes. The Section 194J threshold for professional or technical fees rose from ₹30,000 to ₹50,000 per year, effective 1 April 2025. Payments to a professional below ₹50,000 in the year no longer attract TDS, reducing paperwork for small one-off engagements.
What should you do next?
Update your accounting software's TDS masters with the new thresholds, tell your team to stop collecting TCS on goods, and if you run a firm or LLP, set up Section 194T deductions on partner pay. Getting these wrong means either over-deducting and annoying vendors, or under-deducting and facing interest and disallowance. For help, see Bizeract TDS return filing and bookkeeping services.
What should you verify before using this Income Tax guide?
Before acting on tds and tcs threshold changes from 1 april 2025, verify the current rules or platform behavior with the Income Tax Portal. The practical answer depends on your business model, state, turnover, documents, software stack, and whether the decision affects tax, customer data, paid media spend, or a production workflow.
Use this article as a working checklist, then confirm forms, due dates, AIS or Form 26AS data, regime rules, and filing instructions. In our audits, most expensive mistakes do not come from ignoring the whole process. They come from one stale assumption, one mismatched address, one missing event, or one automation path that nobody tested after launch.
| Checkpoint | Why it matters | Where to confirm |
|---|---|---|
| Current rule or platform status | Limits, forms, policies, and APIs can change after a blog update. | Income Tax Portal |
| Your exact business case | A local shop, freelancer, D2C store, agency, and SaaS team rarely need the same next step. | Documents, invoices, campaign data, analytics setup, or workflow logs |
| Implementation evidence | The safest filing decision is backed by proof, not memory or screenshots from an old setup. | Portal acknowledgement, dashboard export, invoice sample, test lead, or error log |
How do we apply this in real business work?
We start with the smallest decision that can be verified. For compliance work, that means matching PAN, address, bank, invoices, and portal status before filing. For websites, marketing, analytics, and automation, it means testing the real user path from first click to final record. The boring checks catch the costly failures.
A useful rule: if a claim changes money, tax, reporting, or customer communication, keep evidence for it. Save the acknowledgement, export the report, test the form, and note the date you verified the source. That gives you a clean trail when a client, officer, platform, or internal team asks why the setup was done that way.
When should you get expert review?
Get expert review when the next action can create tax exposure, lost reporting data, ad waste, broken customer communication, or production downtime. A simple self-check is enough for low-risk learning. A filed return, new registration, tracking migration, paid campaign restructure, or live automation deserves a second set of eyes before it affects customers or records.
How often should this be rechecked?
Recheck the decision whenever your turnover, state, product mix, campaign budget, website stack, analytics property, or workflow ownership changes. Also recheck it after major portal updates, platform policy changes, annual filing deadlines, and vendor migrations. The guide is useful today only if the facts behind it still match your business.
What is the fastest safe way to decide?
Write the decision in one sentence, list the proof needed for that sentence, and verify only those items first. This keeps the work focused. If the proof confirms the decision, proceed. If one item is unclear, pause and resolve that point before changing filings, campaigns, tracking, website code, or automation logic.
What can go wrong if you skip verification?
The usual failure is not dramatic at first. It looks like a rejected application, a wrong tax invoice, a missing conversion, a duplicate lead, a broken report, or a workflow that silently stops. Those small failures become expensive when nobody notices them until month-end reporting, filing day, or a customer escalation.
What evidence should you keep after making the change?
Keep enough evidence to reconstruct the decision later. For a compliance topic, that usually means the application reference number, registration certificate, invoice sample, return acknowledgement, payment challan, notice reply, or source link checked on the day of filing. For a website, campaign, analytics setup, or automation, keep the before-and-after screenshot, test submission, dashboard export, webhook log, and the exact setting that changed.
This matters because most business fixes are revisited months later, when nobody remembers the original reason. A short evidence trail makes audits faster, handovers cleaner, and vendor conversations more precise. It also keeps the advice in this guide tied to your real operating context instead of becoming a generic checklist that gets copied without review.
- Date checked: record when the official source, dashboard, or portal screen was reviewed.
- Business context: note the entity, state, product, campaign, property, or workflow affected.
- Proof of action: save the acknowledgement, report export, test result, or live URL.
- Owner: assign one person to re-check the item when rules, tools, or business volume change.
Which next step should you take after reading this?
Turn the article into one action list. Mark what is already true, what needs proof, and what needs expert review. If you want to go deeper, compare this guide with TDS Return Filing, Bookkeeping Services, and Business ITR Filing. Then update the decision only after the official source and your own records agree.
Frequently asked questions
I pay ₹45,000 a month as office rent. Do I still deduct TDS?
Under the new Section 194I threshold of ₹6,00,000 per year (₹50,000 per month) effective 1 April 2025, rent of ₹45,000 a month — ₹5,40,000 a year — falls below the limit, so no TDS is required. Under the old ₹2.4 lakh threshold you would have had to deduct. Always confirm the annual total against the ₹6 lakh ceiling.
Do I still collect TCS on goods I sell above ₹50 lakh?
No. Section 206C(1H), the TCS on sale of goods, was omitted from 1 April 2025. Sellers no longer collect it. However, if your buyer is liable to deduct TDS on the purchase under Section 194Q, that obligation continues, so coordinate with large buyers on who is deducting.
My firm pays partners a monthly remuneration. What do we do now?
From 1 April 2025, deduct 10% TDS under Section 194T once the total remuneration, interest, bonus, or commission paid to a partner crosses ₹20,000 in the year. Get the firm a TAN if it does not have one, deduct on crossing the threshold, and deposit and report the TDS like any other deduction.
Did the professional fees TDS threshold change?
Yes. The Section 194J threshold for professional or technical fees rose from ₹30,000 to ₹50,000 per year, effective 1 April 2025. Payments to a professional below ₹50,000 in the year no longer attract TDS, reducing paperwork for small one-off engagements.
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