Budget 2025: Tax Relief for Small Taxpayers
The Budget 2025 has introduced significant changes aimed at easing the tax burden on small taxpayers. By raising the threshold limits for tax deducted at source (TDS) and tax collected at source (TCS), the government aims to simplify tax compliance and improve cash flow for individuals receiving smaller payments. These changes are particularly beneficial for gig workers and those making remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS).
Increased TDS Thresholds for Small Taxpayers
One of the most notable changes in Budget 2025 is the increase in the TDS threshold for various income streams. The government has raised the TDS threshold on dividend income from Rs 5,000 to Rs 10,000. This adjustment means that small taxpayers with minimal dividend income will no longer need to deal with TDS deductions. They can avoid the hassle of adjusting TDS against their tax liability and claiming refunds, which can often be a cumbersome process.
Additionally, the threshold for gig workers has also been increased. Previously, gig workers faced TDS liabilities on payments exceeding Rs 30,000 from each entity. The new budget raises this limit to Rs 50,000. This change acknowledges the growing gig economy and aims to provide relief to individuals who often juggle multiple jobs. However, it is important to note that while the thresholds have increased, the TDS rates remain unchanged. For instance, the TDS rate for dividends and professional services continues to be set at 10%.
Changes to TCS on Outward Remittances
The Budget 2025 also proposes an increase in the TCS threshold for remittances under the LRS. The limit has been raised from Rs 7 lakh to Rs 10 lakh. This change is particularly beneficial for individuals making remittances for education, investments, or travel. Under the current rules, individuals can remit up to $2.5 lakh annually without prior approval from the Reserve Bank of India. However, any amount above this limit is subject to TCS, which can lead to additional cash outflows at the time of remittance.
Moreover, the finance minister has proposed removing TCS on remittances made for educational purposes when the funds come from a loan taken from a specified financial institution. Currently, such remittances attract a TCS of 0.5%. This move is expected to ease the financial burden on families sending their children abroad for education, allowing them to focus on their studies rather than tax liabilities.
Implications for Rent Payments
Another important aspect of the Budget 2025 is the adjustment in TDS regulations concerning rent payments. If a tenant is an individual, they are not required to deduct TDS when paying rent. However, if the tenant is a corporate entity, the increased TDS threshold will benefit landlords who lease their properties to companies. This change aims to simplify the tax process for individuals renting out their properties, making it easier for them to manage their finances.
These adjustments reflect the government’s commitment to supporting small taxpayers and enhancing their cash flow. By reducing the number of transactions subject to TDS and TCS, the Budget 2025 aims to create a more taxpayer-friendly environment.
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