Will You Save More Taxes This Year? New TDS And Carry Forward Rules Simplified

In a big move to simplify tax compliance and offer financial benefits, the government has announced a host of reforms affecting both individuals and businesses. The revised rules provide significant relief to taxpayers, particularly salaried individuals.

CA Gaurav Makhijani, Associate Partner at Roedl & Partner India noted, "Up to Rs 12 lakh of income, there will be no income tax, and for salaried individuals—with the standard deduction of Rs 75,000—the tax-free limit effectively extends to Rs 12.75 lakh. If you fall below this threshold, there's no TDS, and your cash flow remains unaffected." This change ensures greater liquidity and financial security for middle-income earners.

Simplified TDS and TCS Rules

TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions have also been streamlined to reduce complexity. “The government has streamlined TDS and TCS provisions. Notably, TCS on the sale of goods is being removed to eliminate the confusion between TDS and TCS on high-value transactions.

Moreover, the cumbersome higher TDS/TCS rate for non-filers on service payments has been scrapped, easing the compliance burden on businesses,” Makhijani stated.  

Increased TCS Thresholds for Travel and Education

The reforms extend benefits to consumers engaging in overseas tour packages and student loans. Gaurav Makhijani said, "For consumers and businesses alike, the threshold limit for TCS on overseas tour package programs has been raised from Rs 7 lakh to Rs 10 lakh, so no TCS will be applicable on purchases up to Rs 10 lakh.

Similarly, student loans from designated financial institutions will no longer attract TCS, ensuring better liquidity in these scenarios."

Revised Rules for Carry Forward of Losses

Businesses undergoing restructuring will see a vital update in how losses are carried forward. Starting April 1, 2025, "Carry forward of losses is also undergoing a significant change. Previously, in the event of a merger or demerger, the losses’ carry-forward period would reset from the restructuring date. From 1st April 2025, losses will be carried forward from the original year in which they were incurred, allowing an eight-year carry forward period starting from that loss year," Makhijani noted.

Extended Deadlines for Tax Returns

For taxpayers who missed filing their returns, there's now an extended window to correct errors or disclose additional income. The government confirmed, "Finally, for those who missed filing their tax returns on time, there's some relief. The window to file an updated or revised tax return has been extended from two assessment years to four. This change provides extra breathing space to correct errors or disclose additional income, ensuring you stay compliant without undue penalties," Makhijani said.

Additional Updates

Further updates include changes to TDS thresholds and GST provisions, benefiting specific groups like senior citizens. Gaurav Makhijani noted, "Additional changes include adjustments to TDS thresholds on rental payments—from an annual Rs 2.4 lakh to a monthly Rs 50,000 (up to Rs 6 lakh per annum)—and revised GST provisions, including changes on input service distributors and procedural updates. Senior citizens, for example, benefit from improved TDS exemptions on fixed deposit interest up to Rs 1 lakh, further enhancing cash flow."