Amid high expectations for tax relief, FM Nirmala Sitharaman has presented her record eighth Union Budget 2025 in Parliament. As the first full budget of the third Narendra Modi government, she becomes the only Finance Minister to present the Union Budget eight consecutive times.
The removal of higher TDS and TCS rates for non-filers of ITRs under Section 206AB and Section 206CCA of the Income Tax Act, 1961 are the major announcements in the year’s budget.
A higher TDS rate for deductees who are non-filers of income tax returns is been obligated by section 206AB of the Act, while section 206CCA levies a higher TCS rate for the collected in the same category. Such provisions mandate the deductors and collectors to apply a higher rate of twice the specified 5% rate whichever was higher, subject to the conditions.
Union Budget 2021, introduced such sections has the objective to motivate the timely ITR filings. However, they accidentally surged the compliance burden on businesses and financial institutions.
The challenges are been outlined by the representatives from various stakeholders faced via deductors and collectors in validating whether a deductee or collectee has submitted their ITRs.
The same is often directed to the application of higher TDS/TCS rates, blocking of capital, and increased compliance burdens. The Finance Minister to address the same problems and ease the process has proposed the omission of Sections 206AB and 206CCA in Budget 2025.
The same move is anticipated to lessen the compliance burden on deductors and collectors, specifically small businesses and individuals who struggled earlier with the functional complexities and errors. Wef 1st April 2025 the changes will come into force, furnishing relief for taxpayers and businesses alike.
The decision shows the devotion of the government to ease tax compliance and foster a taxpayer-friendly environment. The removal of such sections simplifies the burden on deductors the government carried on to outline the significance of tax compliance via additional measures, along with technology-driven tools and data analytics.
Overall the elimination of higher TDS/TCS rates for the non-filers is an influential step for lessening the compliance load and promoting ease of business operation in India.
