TDS Threshold Changes for FY 2025-26
The Finance Act 2025 raised several TDS thresholds with effect from FY 2025-26, cutting the number of small payments that get caught by withholding. The headline reliefs are for rent, where the Section 194I threshold moved from Rs 2,40,000 a year to Rs 50,000 per month or part of a month, and for professional and technical fees, where the Section 194J threshold rose from Rs 30,000 to Rs 50,000. The rates themselves were largely left alone. What moved was the entry point at which deduction begins.
This piece explains what changed and who benefits. If you need the complete section-by-section rate schedule instead, use our TDS rate chart for FY 2026-27. Here the focus is narrower: the Budget 2025 threshold hikes that took effect from FY 2025-26.
Why Budget 2025 Moved the Thresholds
Many TDS thresholds had been static for years while rents, professional fees and deposit balances rose with inflation. The practical effect was that withholding reached down into small, routine payments, locking up cash for landlords, professionals and depositors who then had to wait until they filed their return to reclaim the excess. Budget 2025 rationalised these limits to reduce the compliance burden and the cash-flow lock-up, so that only genuinely substantial payments trigger deduction.
The design choice is deliberate. Rather than cut rates, which would reduce the credit available to the deductee, the government lifted the entry thresholds. A payment below the new limit escapes TDS entirely, so the payee receives the full amount and the deductor is spared the filing obligation on small sums. The credit mechanics for larger payments stay exactly as before.
Before vs After: The Threshold Changes
The table below sets out the main thresholds that moved, comparing the old position with the position from 1 April 2025 (Finance Act 2025).
| Section | Payment | Threshold up to FY 2024-25 | Threshold from 1 April 2025 |
|---|---|---|---|
| 193 | Interest on securities | Nil | Rs 10,000 a year |
| 194A | Interest from bank, co-operative bank, post office (senior citizen) | Rs 50,000 | Rs 1,00,000 |
| 194A | Interest from bank, co-operative bank, post office (others) | Rs 40,000 | Rs 50,000 |
| 194A | Interest from other payers | Rs 5,000 | Rs 10,000 |
| 194 | Dividend to individual shareholder | Rs 5,000 | Rs 10,000 |
| 194K | Mutual fund income | Rs 5,000 | Rs 10,000 |
| 194B / 194BB | Lottery, crossword, horse race winnings | Aggregate above Rs 10,000 in the year | Above Rs 10,000 in a single transaction |
| 194D | Insurance commission | Rs 15,000 | Rs 20,000 |
| 194G | Commission on lottery tickets | Rs 15,000 | Rs 20,000 |
| 194H | Commission or brokerage | Rs 15,000 | Rs 20,000 |
| 194-I | Rent | Rs 2,40,000 a year | Rs 50,000 per month or part of a month |
| 194J | Professional or technical fees | Rs 30,000 | Rs 50,000 |
| 194LA | Compensation on compulsory acquisition of immovable property (other than agricultural land) | Rs 2,50,000 | Rs 5,00,000 |
Section 194I: Rent Paid by Businesses
Section 194I governs TDS on rent paid by any person other than an individual or HUF (companies, firms, LLPs and so on), and by an individual or HUF whose turnover in the preceding financial year exceeded Rs 1 crore from business or Rs 50 lakh from a profession. The old annual threshold of Rs 2,40,000 has been replaced by a monthly test: Rs 50,000 per month or part of a month. TDS applies only for a month in which the rent exceeds Rs 50,000.
The rates are unchanged: 10% on rent for land, building or furniture and fittings, and 2% on rent for plant and machinery. The effect of the higher threshold is that a great many small commercial tenancies, shared offices, equipment hires and short leases now fall outside TDS entirely. A business paying Rs 45,000 a month in rent, which is Rs 5,40,000 a year, would have deducted TDS under the old Rs 2,40,000 annual threshold but deducts nothing under the new Rs 50,000 monthly limit. A business paying Rs 60,000 a month deducts TDS on each month's rent. For the full mechanics of rent TDS, including the turnover test for individual and HUF tenants, see our guide to TDS on rent under Sections 194I and 194IB.
Section 194IB: Rent Paid by Individuals and HUF
Section 194IB applies to individuals and Hindu Undivided Families who are not covered by Section 194I (turnover up to Rs 1 crore from business or Rs 50 lakh from a profession in the preceding year, or no business at all) and who pay monthly rent above Rs 50,000. Here the change is a rate cut, from 5% to 2%, rather than a threshold move, and it came earlier: the Finance (No. 2) Act, 2024 made it effective from 1 October 2024, so FY 2025-26 is the first full year at 2%.
Budget 2025 itself did not change Section 194IB. A salaried tenant paying Rs 70,000 a month to a landlord, who is required to deduct under 194IB, now withholds at 2% instead of 5%. That leaves more cash with the landlord through the year and reduces the amount the tenant has to deposit and report. The lower rate also softens the cash-flow impact for high-rent residential arrangements in metro cities.
Section 194J: Professional and Technical Fees
Section 194J covers TDS on fees for professional services and for technical services. The annual threshold has been raised from Rs 30,000 to Rs 50,000 per year, per payee, per category.
The rates are unchanged: 10% for professional services, such as fees paid to lawyers, doctors, chartered accountants, architects and consultants, and 2% for technical services. The higher threshold means small, one-off engagements, a single consultancy assignment or a modest annual retainer, now sit below the deduction line. A business paying a consultant Rs 45,000 in the year deducted TDS under the old Rs 30,000 threshold but deducts nothing under the new Rs 50,000 limit. Our guide to TDS on professional and technical fees under Section 194J works through the professional-versus-technical distinction, which decides whether 10% or 2% applies.
Section 194A: Interest Other Than on Securities
Section 194A covers TDS on interest other than interest on securities, most commonly bank and post office fixed deposit interest. From 1 April 2025 the threshold for interest paid by a bank, co-operative bank or post office is Rs 1,00,000 for senior citizens (was Rs 50,000) and Rs 50,000 for others (was Rs 40,000). For interest paid by any other payer, such as a company or firm, it is Rs 10,000 (was Rs 5,000).
The relief here is aimed at retirees and small depositors, for whom deposit interest is often the main source of income. Raising the threshold for senior citizens means fewer of them face TDS on modest interest earnings and then have to file a return purely to reclaim it, or submit Form 15H to prevent deduction in the first place. The threshold is tested per payer for the whole year, so a depositor with FDs across several branches of the same bank is aggregated by that bank.
What Deductors Must Do From FY 2025-26
The thresholds are only useful if your systems reflect them. Deductors need to update their vendor and deduction masters so that the new limits, Rs 50,000 per month for 194I, Rs 50,000 for 194J, and Rs 1,00,000 / Rs 50,000 / Rs 10,000 for 194A, are applied from the first payment of FY 2025-26. Applying the old, lower thresholds means deducting where no deduction is due, which annoys vendors and locks up their cash. Applying them too generously means under-deduction and exposure to interest and disallowance.
One point does not change. If a payee has not furnished a PAN, Section 206AA requires deduction at 20% or the applicable rate, whichever is higher, once the payment crosses the threshold. The thresholds still decide whether any TDS is due; missing PAN only raises the rate. Collect and verify PAN before the first payment to any new vendor, because the higher-rate default applies from the outset and is difficult to unwind later.
Who Benefits Most
The pattern across all four sections is a shift of small, routine payments out of the TDS net. Small landlords, especially those letting commercial space or equipment at Rs 50,000 a month or less, no longer face deduction at source. Professionals taking on modest annual assignments below Rs 50,000 receive their full fee. Senior citizens and small depositors keep more of their interest through the year rather than reclaiming it at return time. High-rent residential tenants under 194IB benefit from the lower 2% rate. In each case the relief is about cash flow and paperwork, not about a lower final tax, because the credit for any TDS that is deducted still flows through to the payee's return.
This article is based on the amendments made by the Finance Act 2025 to the TDS provisions of the Income Tax Act, effective for FY 2025-26, covering the revised thresholds under Sections 193, 194, 194A, 194B, 194BB, 194D, 194G, 194H, 194I, 194J, 194K and 194LA, and the PAN-related default under Section 206AA. The Section 194IB rate cut to 2% was made by the Finance (No. 2) Act, 2024 from 1 October 2024. From 1 April 2026 (tax year 2026-27) these TDS provisions sit in Section 393 of the Income-tax Act, 2025.
