The start of July 2025 marks the rollout of significant updates to India’s Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) framework. Announced as part of the Union Budget 2025 and notified through various CBDT circulars, these changes reflect the government’s ongoing focus on streamlining tax compliance, widening the tax base, and enhancing transparency in financial transactions. For businesses and chartered accountants, this is a critical moment to review processes, update systems, and guide clients to ensure full compliance under the new regime. Failing to adapt swiftly could expose businesses to penalties, interest, or scrutiny, especially as tax authorities increasingly rely on technology and data analytics to monitor compliance.
One of the most discussed changes is the adjustment of TCS rates on foreign remittances under the Liberalised Remittance Scheme. Effective 1 July 2025, the threshold for the higher 20% TCS rate on foreign remittances has been raised to Rs 10 lakh in a financial year, providing some relief for those remitting smaller amounts. Additionally, educational and medical remittances supported by loan documentation or bills will continue to attract lower TCS rates. However, the reporting and documentation requirements to support the concessional rates have been tightened. Chartered accountants must ensure clients are aware of these conditions and assist in preparing or verifying supporting documents before remittance is made through authorized dealers. Many banks are updating their compliance checklists, and CAs should guide clients on these requirements to avoid transaction delays or excess TCS deduction.
Another important change is the refinement of TDS obligations on online gaming winnings. As of July 2025, TDS is to be deducted at the time of withdrawal or at the end of the financial year, whichever is earlier, at prescribed rates. This modification aims to plug gaps where winnings were not taxed because they were not withdrawn. Gaming platforms are required to maintain detailed ledgers of player accounts, and chartered accountants advising these platforms must ensure that reporting mechanisms, reconciliation processes, and compliance filings are in place. For individual taxpayers engaging in online gaming, CAs should advise on accurate disclosure of winnings and TDS credits in returns to avoid mismatches with AIS data.
Property transactions are also impacted by the new TDS rules. The 2025 amendments provide clearer guidance on how TDS under section 194-IA should be applied in cases involving multiple buyers or sellers. The threshold for deduction—currently based on individual shares in the property—has been clarified, with the intention of ensuring that large transactions are not split artificially to avoid TDS. For chartered accountants handling property sale or purchase documentation, this means revisiting client agreements, educating clients on their obligations, and ensuring that the correct amount of TDS is deducted and deposited on time. This is particularly important as property transaction data is closely monitored through SFT reporting and linked to AIS and Form 26AS.
Another area requiring immediate attention is the need for businesses to review and update ERP or accounting software to reflect the revised TDS and TCS rates and thresholds. Whether using Tally, SAP, Zoho, or custom systems, businesses must ensure that ledgers, deduction logic, and reporting templates are aligned with the latest rules. Chartered accountants should assist clients in reviewing their systems and provide checklists to verify that the necessary changes have been implemented. This is also the right time to revisit vendor agreements to ensure that TDS clauses are updated in line with the new provisions.
As tax authorities increasingly rely on AI-driven scrutiny and faceless assessments, the margin for error in TDS and TCS compliance is narrower than ever before. Mismatches between tax deducted or collected and what is reflected in Form 26AS or AIS can trigger automated queries, delay refunds, or create unnecessary litigation risks. Chartered accountants can play a key role by offering reconciliation services, helping clients match their books with tax filings and government records. Early identification of discrepancies ensures timely correction, whether through revised returns, rectification applications, or clarifications during assessments.
The July 2025 changes underline the government’s commitment to a more efficient and digitally driven tax administration. While these measures may appear challenging initially, they ultimately aim to create a level playing field, reduce evasion, and promote transparency. Chartered accountants, as trusted advisors, are ideally placed to help clients transition smoothly by focusing on compliance readiness, system updates, and education. Timely communication with clients about these changes, supported by practical guidance and clear documentation protocols, will go a long way in ensuring that businesses remain compliant and confident in this evolving landscape.
In conclusion, the new TDS and TCS rules effective 1 July 2025 represent both a compliance challenge and an opportunity for businesses and CAs to demonstrate proactiveness and professionalism. By understanding the changes in depth and guiding clients with clarity, chartered accountants can reinforce their indispensable role in India’s tax ecosystem as it continues its digital transformation.
