TDS (Tax Deducted at Source) Rules Applicable from 1st August 2025 – Detailed Guide

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🔁 1. Extension of Relief for TDS Short Deduction Due to Inoperative PAN (from 1st August 2025 onwards)

When deducting TDS, the deductor is expected to ensure the PAN of the deductee is active. If the PAN is inoperative (e.g. not linked with Aadhaar), the law mandates higher TDS rates under Section 206AA (usually 20%).

However, many taxpayers faced demand notices due to short TDS deduction—even though the PANs were later made operative.

To offer relief, the government has extended the benefit:

If the PAN was inoperative at the time of TDS deduction but was subsequently made operative (by linking with Aadhaar), no penal consequences will arise for short deduction of TDS.

✅ Example:

• Date of TDS payment: 10th August 2025
• Recipient’s PAN: Inoperative on 10th August (Aadhaar not linked)
• TDS deducted: 10% (normal rate) instead of 20% (as per 206AA)
• PAN made operative: Linked successfully on 20th September 2025

🟢 Under the new rule: You won’t be penalized for short deduction as the PAN is now operative.

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📅 2. TDS Rule Changes Already in Effect from 1st April 2025 (for FY 2025–26)

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📌 2.1 Section 194A – TDS on Interest (other than securities)

✅ Updated Thresholds:

• ₹50,000 (if senior citizen & receiving from bank/co-op/post office)
• ₹40,000 (for others from same institutions)
• ₹10,000 (from other payers)

✅ Example:

• You are under 60 and earned ₹38,000 interest from a bank – No TDS
• You earned ₹55,000 from a NBFC – TDS applicable on ₹45,000
  (Since threshold from NBFCs is ₹10,000)

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📌 2.2 Section 194I – TDS on Rent

✅ New Threshold:

• Earlier: ₹2.4 lakh/year
• Now: ₹6 lakh/year

✅ Example:

• Annual rent paid: ₹5.9 lakh – No TDS
• Annual rent paid: ₹6.5 lakh – TDS @ 10% on full amount = ₹65,000

This greatly benefits small business offices, clinics, etc. renting small spaces.

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📌 2.3 Section 194T – New TDS on Remuneration to Partners

This is a new section effective from April 1, 2025, to avoid tax leakage.

✅ Applicability:

• Applies to partnership firms and LLPs
• On remuneration, interest, bonus, commission etc. paid to partners
• TDS rate: 10%

✅ Example:

• Partner A gets ₹4,00,000 as salary + ₹1,00,000 interest
• Total: ₹5,00,000
• TDS @10% = ₹50,000 to be deducted by firm

Previously, there was no TDS on payments to partners.

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📌 2.4 Section 194LBC – TDS on Securitisation Trust Income

✅ Update:

• Flat 10% TDS for all types of investors
• Earlier: 25% for individuals/HUF and 30% for others

✅ Example:

If you received ₹1,00,000 from a securitisation trust:

• Now: TDS is ₹10,000
• Earlier: TDS could be ₹25,000 or ₹30,000 depending on entity type

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📌 2.5 Section 195 – TDS on Rent Paid to NRI

When Indian tenants pay rent to Non-Resident Indian (NRI) landlords:

✅ Rule:

• TDS must be deducted @ 31.2% (or as per DTAA if applicable and Form 10F submitted)

✅ Example:

• Monthly rent = ₹50,000
• Annual = ₹6,00,000
• TDS = ₹6,00,000 × 31.2% = ₹1,87,200
• Net payable to NRI landlord = ₹4,12,800

This rule requires tenants to obtain Form 15CA/CB before making payments to NRI.

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🔚 Summary Table of Major TDS Updates

Section	Type	Threshold/Rate Changes
194A	Interest (Bank/NBFC/PO)	Threshold: ₹10k to ₹50k
194I	Rent	Threshold: ₹2.4L → ₹6L
194T (New)	Partner Remuneration	New TDS: 10%
194LBC	Securitisation Trust Income	Unified TDS @ 10%
195	Rent to NRI	TDS @ 31.2%
Relief Rule	PAN–Aadhaar Linked Post-Facto	No penalty for lower TDS if PAN now operative

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📢 Final Notes, References & Disclaimer:

• The above explanation is based on Income Tax Act amendments for FY 2025-26, government circulars, and CBDT updates.
• Please consult your tax advisor or CA before taking any financial decision or TDS deduction.
• The latest changes effective from 1st August 2025 mainly concern relief from penal TDS notices where PAN was made operative later.
• For exact legal language, refer to Income Tax Act, 1961, latest CBDT Circulars, and Union Budget FY25–26 documentation.
• This content is for educational purposes only. All liabilities arising from decisions made using this content rest with the reader.

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