The New Income Tax Act,2025 has introduced various changes to India’s tax framework, with Tax Deducted at Source (TDS) provisions undergoing a complete rebuild. These changes are not just legislative, they are operational, affecting how businesses, professionals, and individuals manage tax compliance on a daily basis. With immediate applicability, the new TDS rules demand prompt attention and system-wide updates.
Tax Deducted at Source (TDS)
Tax Deducted at Source (TDS) is a mechanism introduced by the Indian government to ensure timely and efficient tax collection at the point of income generation.
TDS applies to a wide range of income types, including salaries, interest on fixed deposits, rent, commissions, professional fees, and more. The rates and thresholds for deduction are prescribed by the Income Tax Department and vary depending on the nature of the payment and the category of the recipient.
Also read: Banks mandated to deduct TDS onannual interest income exceeding Rs. 50,000
Changes in TDS provisions 1. New Section Codes and Forms
The Act introduces new section numbers and corresponding codes for each type of transaction. For example:
| Nature of Payment | New Section | Code | New Form |
| Salary (Private Employee) | 392 | 1002 | Form 138 |
| PF Withdrawal | 392 | 1004 | Form 140 |
| Rent by Individual/HUF | 393(1) | 1007 | Form 141 |
| Online Gaming Winnings | 393(3) | 1060 | Form 140 |
| VDA Transactions (Crypto) | 393(1) | 1036 | Form 141 |
TDS Categories: Explained 1. Salary and PF Withdrawal
TDS on salary continues to be deducted at average slab rates for government and private employees, now reported under Section 392 using Form 138. PF withdrawals exceeding Rs. 50,000 attract a 10% TDS under Section 392A, reported via Form 140. These provisions ensure tax is collected directly from income sources.2. Commission and RentCommission payments, whether insurance or other types are taxed at a flat 2% rate under Section 393(1), with a Rs. 20,000 threshold. Rent payments are split by payer type: individuals/HUFs pay 2% TDS if rent exceeds Rs. 50,000/month, while specified persons pay 2% for plant & machinery and 10% for buildings. These are reported using Form 140 or 141, depending on the payer.3. Immovable Property TransactionsProperty transfers above Rs. 50 lakh attract 1% TDS, while joint development agreements and compensation payouts are taxed at 10%. These fall under Section 393(1) and are reported using Form 140 or 141, depending on the transaction type. This ensures high-value real estate deals are tracked for tax compliance.4. Interest IncomeInterest earned from banks, post offices, securities, and other sources is taxed at 10%, with thresholds ranging from Rs. 10,000 to Rs. 1,00,000 for senior citizens. These fall under Section 393(1) and are reported using Form 140. The uniform rate simplifies compliance across financial institutions.5. Professional and Technical ServicesContract payments are taxed at 1% for individuals/HUFs and 2% for others. Professional services attract 10% TDS, while technical services, royalties, and call center payments are taxed at 2%. These are governed by Section 393(1) and reported using Form 140 or 141, depending on the payer and nature of service.6. Dividends, Mutual Funds, and Business TrustsDividends from domestic companies and income from mutual funds or business trusts (interest, rent, dividend) are taxed at 10%. These fall under Section 393(1) and are reported using Form 140. This ensures consistent treatment of capital market-linked income.7. Perquisites, Gaming, and VDAPerquisites in cash or kind are taxed at 10% if they exceed Rs. 20,000. Online gaming winnings and lottery/gambling income are taxed at a flat 30%, regardless of amount. Virtual Digital Asset (VDA) transactions such as crypto are taxed at 1%. These fall under Section 393(1) and 393(3), reported using Form 140 or 141.8. NRI PaymentsCross-border payments to non-residents—such as interest, dividends, capital gains, and distributed income are taxed at rates ranging from 4% to 20%, depending on the nature of the transaction. These are governed by Section 393(2) and reported using Form 144 and Form 27Q.9. TCS TransactionsTax Collected at Source (TCS) applies to sales of liquor, timber, scrap, minerals, and luxury items (e.g., cars, watches, yachts) valued above Rs. 10 lakh, at rates of 1–2%. Overseas tour packages and foreign remittances under LRS attract TCS at 2% or 20%. These fall under Section 394 and are reported using Form 143 and Form 27EQ.Conclusion
The New Income Tax Act, 2025, represents a decisive step toward changing India’s tax system. The immediate applicability of TDS provisions underscores the government’s commitment to transparency, efficiency, and real-time compliance.
