The Indian government has introduced the Income Tax (No. 2) Bill, 2025, which aims to replace the more than six-decade-old Income Tax Act of 1961 with a much simpler, more transparent, and electronically simplified tax system. The Bill signifies a significant change in the way tax compliance in India is arranged from 1 April 2026.
Although the focus continues to be mostly on new income Tax slabs as well as revised rebate structures, a crucial area has been TDS (Tax Deducted at Source). As the principal method of advance tax collection, the TDS provisions have been reorganized, simplified as well and made tax-friendly under the brand new Bill.
In this article, we will look at what is TDS in tax, point out the important changes introduced in the brand new Income Tax Bill, and also describe the way they affect businesses, professionals and individuals alike.
What is TDS in Tax?
TDS stands for Tax Deducted at Source. It is a mechanism where the person making a payment such as salary, professional fees or interest which deducts a specified amount of tax before making the payment to the recipient. The deducted amount is then deposited with the Government, and the recipient can claim it as a credit when filing their tax return.
This system ensures steady tax collection and broadens the tax base by tracking incomes in real time.
What’s New in the Income Tax Bill 2025?
The new Income Tax Bill consolidates and streamlines TDS provisions under Chapter XIX. Here’s what has changed:
1. Centralised TDS Table (Section 393)
A single, well-defined TDS table replaces scattered provisions under the old regime. It includes deduction rates, thresholds, and deductor types across various income categories.
Key Entries from the New TDS Table:
| Nature of Payment | TDS Rate | Threshold |
| Salary (Section 392) | As per the slab | Based on total income |
| Contractors – Individuals/HUFs | 1% | ₹30,000 / ₹1,00,000 |
| Contractors – Others | 2% | ₹30,000 / ₹1,00,000 |
| Professional Fees | 10% | ₹50,000 |
| Technical Services | 2% | ₹50,000 |
| Director’s Remuneration | 10% | ₹50,000 |
| Purchase of Goods | 0.1% | ₹50,00,000 |
| E-commerce Participants (Platforms) | 0.1% | No threshold |
| Crypto & Virtual Digital Assets (VDA) | 1% | No threshold |
| Life Insurance Pay-outs (Taxable Part) | 2% | ₹1,00,000 |
| Perquisites/Benefits in Business | 10% | ₹20,000 |
| Dividend | 10% | No threshold |
Note: If PAN is not furnished, TDS may be levied at 5% or 20%, depending on the case.
2. Salary TDS (Section 392)
- Employers must account for all salary components, exemptions, and earlier TDS deductions.
- EPF withdrawals above ₹50,000 that are taxable will attract 10% TDS.
- For foreign currency salaries, conversion will be done using the prescribed exchange rates.
3. TDS on Crypto & Digital Assets
The Bill continues the 2022 treatment of Virtual Digital Assets (VDAs) like cryptocurrencies and NFTs:
- TDS at 1% on the consideration for VDA transfers.
- No threshold is prescribed as TDS applies even on small transactions.
- No deductions are allowed other than the cost of acquisition.
4. Purchase of Goods (Like Section 194Q)
- Applicable for businesses whose turnover exceeds ₹10 crore in the preceding financial year.
- TDS at 0.1% on the amount exceeding ₹50 lakh per seller per year.
5. Perquisites/Benefits (Section 194R Analogue)
- If a business provides gifts, perks or incentives to a vendor, agent, or influencer, TDS at 10% must be deducted.
- If the benefit is in kind or partly in kind, tax must be deposited before releasing the benefit.
6. Lower or Nil TDS Certificates (Section 395)
Taxpayers can apply for a certificate from the Assessing Officer for lower or zero deduction of TDS if their income justifies it. This helps avoid refund situations and eases cash flow
7. Compliance Enhancements
- TAN & PAN Requirements: Higher TDS rates (up to 20%) apply if PAN/TAN is not provided.
- TDS Statements: Will be processed and matched to taxpayer accounts.
- Deductor Refunds: If tax is wrongly deducted, a refund can be claimed within 30 days.
Practical Implications
- Businesses must carefully track thresholds and update their ERP systems to incorporate new TDS logic.
- Platforms like e-commerce operators need to ensure VDA and marketplace payments are covered appropriately.
- Individuals receiving benefits or perks from businesses will see 10% TDS deducted even on non-cash rewards.
- Crypto traders must prepare for continued TDS scrutiny on each trade.
When Does It Apply?
These new TDS in new income tax bill 2025 will take effect from 1 April 2026, subject to any amendments or notifications.
All changes in TDS in new income tax bill take effect 1 April 2026.
Final Thoughts
The TDS in new income tax bill modifications do more than modify rules as they keep the door open to a much simpler, faster, and clearer tax process. The Bush administration now puts all TDS rules into one place, accelerates refunds and also sets clear rates and limitations so people are able to adhere to them effortlessly.
In case you work for a salary, operate your very own business, market on the internet, or trade crypto, these new steps dictate when and how income tax leaves your income. Understanding what’s TDS in tax and just how it functions in the brand new regulations can help you remain compliant with the law, avoid fines, and keep your cash programs constant.
Because these rules begin on 1 April 2026, make use of this time to analyze your accounts, design your spending, and get prepared for a smoother and quicker tax cut procedure down the road.
Frequently Asked Questions (FAQs)
1. What is new in the Income Tax Bill in 2025?
The Income-tax (No. 2) Bill, 2025 replaces the 1961 Act with a simpler, digital-first framework. It introduces new tax slabs, higher rebates, streamlined TDS/TCS provisions, faster refund processes, and easier faceless assessments. These changes take effect from 1 April 2026.
2. What will be the new tax slab in 2025?
From 1 April 2026, the new slabs are:
₹0–4L: 0%, ₹4–8L: 5%, ₹8–12L: 10%, ₹12–16L: 15%, ₹16–20L: 20%, ₹20–24L: 25%, above ₹24L: 30%. These rates apply under the default new regime.
3. How to calculate new tax 2025?
Identify taxable income, apply the slab rates, then reduce applicable rebates (₹12,500 up to ₹5L and up to ₹60,000 for ₹12L–phase-out range). Add cess and surcharge if applicable. The Bill’s rebate formula smooths out tax jumps.
4. How is ₹12.75 lakh tax-free?
The new rebate system gives full relief up to ₹12 lakh and partial relief up to the phase-out limit. This means for many taxpayers, income up to ₹12.75 lakh results in zero net tax after applying rebates.
