Understanding Tax Deduction at Source (TDS) Under the Income Tax Bill, 2025

1. What is Tax Deduction at Source (TDS)?

TDS is a system where a person (deductor) who is liable to make a payment to another person (deductee) is required to deduct tax at the source before making the payment. The deducted tax is then remitted to the government.

The provisions for TDS apply to different categories of income, including:

• Salaries
• Interest income
• Rent
• Contractor payments
• Professional fees
• Commission and brokerage
• Sale of specified goods

Relevant Sections:

• Section 392: TDS on Salaries​Income Tax Bill, 2025
• Section 393: TDS on other payments​Income Tax Bill, 2025
• Section 394: Collection of tax at source (TCS)​Income Tax Bill, 2025

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2. TDS on Salaries

According to Section 392 of the Income Tax Bill, 2025, any person responsible for paying salary must deduct TDS at the time of payment. The rate of deduction is based on the average income-tax rate applicable to the estimated salary income of the employee for the financial year​Income Tax Bill, 2025.

Additionally, in cases where non-monetary perquisites are provided to employees, the employer may choose to pay tax on behalf of the employee without deducting it from the salary​Income Tax Bill, 2025.

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3. TDS on Other Payments

The bill specifies different rates and thresholds for TDS deductions on various types of payments. Below is a detailed table of TDS rates applicable under the Income Tax Bill, 2025, along with the relevant section references:

TDS on Various Payments (Income Tax Bill, 2025)

Nature of Payment	Deductor	TDS Rate	Threshold Limit
Salaries	Employer	As per applicable tax slab	No threshold
Interest on Fixed Deposits (FDs) & Recurring Deposits (RDs)	Banks, Co-operative Banks, Post Office	10%	₹40,000 (₹50,000 for senior citizens)
Dividend Income	Company Paying Dividend	10%	₹5,000
Winning from Lotteries, Crossword Puzzles, and Game Shows	Any person paying winnings	30%	₹10,000
Winning from Horse Races	Race Club	30%	₹10,000
Rent on Immovable Property	Individual or Business	2% (Plant & Machinery), 10% (Land & Building)	₹2,40,000
Payment to Contractors	Any person	1% (Individual/HUF), 2% (Others)	₹30,000 (Single Payment) or ₹1,00,000 (Annual)
Professional/Technical Fees	Any person	10%	₹30,000
Commission/Brokerage	Any person	10%	₹15,000
Insurance Commission	Insurance Companies	5%	₹15,000
Sale of Motor Vehicles	Seller	1%	₹10,00,000
Purchase of Property	Buyer	1%	₹50,00,000
Payment to Non-Residents	Any person	As per DTAA or 20%	No threshold
Royalty Payment	Any person	10%	₹30,000
Purchase of Goods (under Section 194Q)	Business turnover above ₹10 Cr	0.1%	₹50,00,000
E-commerce Transactions	E-commerce platforms	1%	₹5,00,000

These deductions must be made at the time of crediting or payment, whichever is earlier​Income Tax Bill, 2025.

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4. Tax Collection at Source (TCS)

Apart from TDS, certain transactions require Tax Collection at Source (TCS), where the seller collects tax from the buyer at the time of sale. Some of the key transactions under TCS include:

Nature of Transaction	TCS Rate	Threshold Limit
Sale of Scrap	1%	No Threshold
Sale of Minerals (Coal, Lignite, Iron Ore)	1%	No Threshold
Sale of Alcoholic Liquor	1%	No Threshold
Sale of Foreign Exchange	5%	₹7,00,000
Sale of Overseas Tour Packages	5%	No Threshold

TCS ensures tax compliance and helps track large transactions that might otherwise go unreported.

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5. TDS Compliance & Due Dates

Due Dates for TDS Payments

Month of Deduction	TDS Payment Due Date
April – February	7th of the following month
March	30th April

Due Dates for TDS Return Filing

Quarter	Quarter Ending	TDS Return Due Date
Q1	30th June	31st July
Q2	30th September	31st October
Q3	31st December	31st January
Q4	31st March	31st May

Timely compliance with TDS payments and return filings helps avoid penalties and interest charges​Income Tax Bill, 2025.

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TDS Comparison – Income Tax Act, 1961 vs. Income Tax Bill, 2025

The Income Tax Bill, 2025, retains the core principles of TDS under the Income Tax Act, 1961, while introducing structural improvements, clarity, and scope expansion. Below is a quick summary of the key differences:

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1. Structural & Conceptual Changes

Aspect	Income Tax Act, 1961	Income Tax Bill, 2025
TDS Sections	Scattered across multiple sections (192-206C)	Consolidated under Sections 392-394 for clarity
Terminology	Uses Assessment Year & Previous Year	Replaces with "Tax Year"
Scope for Non-Residents	Limited clarity on applicability	Clearer rules for source-based taxation

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2. TDS on Salaries

Aspect	Income Tax Act, 1961	Income Tax Bill, 2025
TDS Calculation	As per Section 192, based on tax slabs	Same provision under Section 392
TDS on Perquisites	Employer can pay tax on non-monetary benefits	Employer must disclose tax on non-monetary perquisites

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3. TDS on Other Payments

Nature of Payment	Act, 1961 (Section 194-series)	Bill, 2025 (Section 393)
Interest on FDs/RDs	10% (Threshold: ₹40,000/₹50,000)	Same under Section 393(3)
Dividend Income	10% (Threshold: ₹5,000)	Same under Section 393(1)
Winning from Lotteries	30%	Same under Section 393(1)
Rent (Property & Machinery)	2% (Plant & Machinery), 10% (Land & Building)	Same under Section 393(1)
Professional Fees	10% (Threshold: ₹30,000)	Same under Section 393(1)
Cryptocurrency Transactions	1% (introduced in 2022)	Retained under Section 393(1)

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4. Tax Collection at Source (TCS)

Nature of Transaction	Act, 1961 (Section 206C)	Bill, 2025 (Section 394)
Sale of Scrap	1%	Retained under Section 394
Sale of Minerals (Coal, Iron Ore)	1%	Retained under Section 394
Foreign Exchange Transactions	5% if remittance exceeds ₹7,00,000	Same under Section 394
Overseas Tour Packages	5%	Same under Section 394

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5. Compliance & Reporting

Aspect	Act, 1961	Bill, 2025
TDS Due Date	7th of the following month	No change
TDS Return Filing	Quarterly (Form 26Q/24Q)	No change
Penalties for Non-Compliance	- Interest @ 1-1.5% per month - Late filing fee ₹200 per day - Disallowance of expense	No change

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6. Key Improvements in the Income Tax Bill, 2025

✅ Simplification & Consolidation – TDS rules are now under fewer sections
✅ Introduction of "Tax Year" Concept – Eliminates confusion between Assessment Year & Previous Year
✅ Clarity on Non-Resident Taxation – Defines source-based taxation clearly
✅ Cryptocurrency & Digital Transactions Covered – Ensures tax compliance on modern financial activities

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Conclusion: What’s Better in the New Bill?

The Income Tax Bill, 2025, primarily organizes and clarifies existing TDS provisions rather than overhauling them. Most TDS rates and thresholds remain unchanged, but the clarity and structure improvements make compliance easier.