Budget 2025: Nirmala Sitharaman's big announcement for senior citizens

The Union budget for FY26 has raised thresholds for tax deducted at source (TDS) across various income sources. Among the key changes, the biggest relief comes to senior citizens who depend on interest income in their retirement. The limit for TDS on interest earned would be doubled from the current ₹50,000 to ₹1 lakh for senior citizens. For others, this exemption limit has been increased from the current ₹40,000 to ₹50,000 on interest from deposits.

Currently, TDS is deducted at interest income above ₹50,000 for senior citizens with total income less than the tax exemption limit of ₹3 lakh (in the new tax regime). They then would have to file an income tax return (ITR) to claim a refund. To avoid claiming a refund, senior citizens could submit Form 15H to request the bank to not deduct TDS.

The ₹1 lakh exemption limit will ease this compliance burden.

TDS on securities interest, rent

Apart from TDS on interest on deposits, threshold for TDS on interest from securities, rent paid by non-individuals, professional fee and dividend income has been increased (see grafic).

Until now, 10% TDS is deducted on interest from securities held in demat format. As per the budget proposal, interest up to ₹10,000 will be exempt from TDS. This change benefits those who invest in non-convertible debentures (NCDs). The other income that benefits from increase in TDS threshold is dividend paid to individual shareholders, and income in respect of units of a mutual fund.

Tenants are required to deduct TDS on rent after it crosses specified thresholds. For tenants other than individuals and HUFs (Hindu Undivided Families), this threshold will be increased from the current ₹2.4 lakh annual rent to ₹50,000 per month rent. This change would bring TDS provisions for all types of tenants at par, as individuals and HUF are also required to deduct TDS on monthly rent above ₹50,000.

“This change brings the TDS threshold at par. However, the rates continue to be different. While individuals and HUF tenants deduct 2% TDS, others deduct 10% TDS,” said Mayank Mohanka, founder, TaxAaram India and partner at S.M. Mohanka & Associates.

TCS on foreign transactions

In another change, the threshold after which TCS on foreign transactions done under the Liberalized Remittance Scheme (LRS) applies has been increased to ₹10 lakh from the current ₹7 lakh. These transactions include purchase of a foreign tour package, buying stocks of foreign companies, sending gifts to relatives living abroad, and payments made for medical treatments.

Until now, 5% TCS is to be paid on purchasing foreign tour packages till ₹7 lakh, after which the rate increases to 20%. LRS for medical treatment attracted no TCS till ₹7 lakh, after which 5% TCS would be deducted. On all other transactions, there is no TCS till ₹7 lakh and 20% after this threshold. The budget has increased the ₹7 lakh threshold in all these categories to ₹10 lakh.

Essentially, travellers paying for foreign tour packages will now pay 5% TCS till ₹10 lakh, whereas all other foreign transactions are exempted from TCS till ₹10 lakh.

It should be noted that the ₹10 lakh limit collectively applies to all transactions under LRS and not to individual categories.

For instance, let's say in a financial year, you bought a tour package of ₹6 lakh. Two months later, you invested ₹4 lakh in foreign stocks. With these two transactions, your ₹10 lakh threshold is exhausted; so, all other foreign payments after this will attract TCS as per the applicable rates. If you have foreign remittances lined up in the coming year, it would help to spend on those categories first with zero to low TCS rate to get benefit till the ₹10 lakh threshold.

In a major relief to students studying abroad, the finance minister has removed TCS on remittances made for education purposes, provided the loan is taken from specific financial institutions. Under the current rules, 0.5% TCS was to be paid on education-related remittances above ₹7 lakh.

Remittances for education that are not financed by a loan would attract 20% TCS in excess of ₹10 lakh. The increase in thresholds will save ₹45,000-60,000 in TCS for remittances upto ₹10 lakh.