In August 2025, the Indian government enacted the Income Tax Bill 2025 which superseded the Income Tax Act of 1961. The new legislation is intended to make the tax laws simpler, less confusing, and make it easier to comply with such policies by all, salaried workers to those who run corporations. Among the key changes is that concerning TDS (Tax Deducted at Source) that will impact tax deduction levied on your income and will also change the way you claim the refunds.
What Is TDS and Why It Matters?
TDS is the tax your employer,the bank you use or other service provider deducts on your income before remitting your salary. It is applicable to interest, salaries, rent, and commissions among others. The amount deducted is paid to the government and you are able to recover it when you submit the income tax refund- provided the total tax liability is less as compared to TDS paid.
Key TDS Updates in the New Income Tax Bill
- Late Returns Now Refunded Early there was a time when you were unable to claim a refund of the income tax you had to pay in case you filed your income tax after the deadline period. This has been amended by the new law. Late filing in this case will not stop you to claim TDS refund, provided that you have a proper and complete return.
- Nil TDS made easier In case your income falls below the taxable limit, now you can even obtain a Nil TDS certificate, in advance. This is the absence of any tax deduction on what you pay. This is particularly useful to the senior citizens, students and those NRIs whose income is low or exempted.
- TDS Correction Time Shortened Days of limitation to TDS making of correction statements are shortened to two years as against six years. This is useful in sorting out the mistakes quicker and minimising the conflict in long term.
- Increased TDS Deductions Higher limits have been increased at which TDS has to be deducted by the government. For example:
- Bank deposit interest: This was raised to ₹500,000 and₹ 600,000 (raise of ₹400,000 to ₹50,000)
- Rent: increase in threshold amounting to rent of ₹6 lakh Indian rupees annually as opposed to rent of ₹2.4 lakh Indian rupees annually
- Professional fees: threshold raised to ₹15,000 rupees to ₹50,000 rupees Such shifts will also reduce numbers of individuals subjected to withholding taxes on minor transactions automatically.
When Will These Changes Start?
This new regime Income Tax Bill will apply as of April 1, 2026, in the financial year 2026- 27. Until such a time, the existing regulations which are being governed by the 1961 act are to remain in force.
Final Thoughts
The Income Tax Bill 2025 is a huge relief and clarification to taxpayers. It contains simpler rules on refunds, simplified TDS certificates and increased limits of deductions it is meant to make the tax filing easier and more balanced. Many people in cities can save their money and prevent making useless deductions. These changes can serve people who have a paid job (salaried), freelancing, retirees, and many others.
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