Tax Deducted at Source (TDS)
The Finance Act 2025 continues the move towards decriminalizing TDS/TCS defaults by extending the time available for deposit and filing, while still levying interest and penalties on late submissions.
Major updates under the Act include:
- Deductors no longer need to verify the ITR-filing status of payees, simplifying compliance procedures.
- Higher exemption limits across various categories include:
- Interest on securities: exempt up to ₹10,000
- Interest from banks/co‑ops: ₹50,000 for non‑seniors, ₹1 lakh for seniors
- Professional fees (194J): ₹50,000
- Dividends, mutual fund income, and winnings: thresholds increased to around ₹10,000–12,000
- TDS on securitisation trust distributions reduced from 25–30 percent to 10 percent.
- New Provisions for Digital Transactions –
- Crypto/NFT purchases taxed at 1 percent TDS under Section 194S.
- Online game winnings subject to 30 percent TDS under Section 194BA.
- E-commerce & Marketplace Compliance –
- TDS on partner remunerations now required (new Section 194R).
- TCS at 1 percent imposed on e-commerce platform sales .
- TCS under Section 206C(1H) on sales has been abolished, though buyers still have TDS obligations under Section 194Q for certain purchases.
- Companies now have up to 85 days (or longer under the new SOP) to deposit TDS without facing prosecution, though interest remains payable.
- No TDS/TCS correction statements are allowed beyond six years from the end of the relevant financial year
Taxation of outbound remittances
The tax on outbound remittances from India will increase from five percent to 20 percent, affecting funds sent overseas for vacations, investments, and gifts. However, it is important to note that small transactions equal to or below INR 700,000 to INR 1 million. No TCS will be levied on remittances for education purposes if the funds are sourced from a loan provided by a specified financial institution.
| Nature of remittance | Old tax rates applicable till June 30, 2023 | As per Budget 2025 |
|---|---|---|
| Overseas tour program (payment for purchase of ticket, booking hotel, etc.) |
|
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| LRS – for education and medical treatment |
|
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| Remittance related to studies abroad, where source of fund is educational loan |
|
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| LRS – other than education and medical treatment |
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Minimum Alternate Tax (MAT)
All companies, whether domestic or foreign, are obligated to pay MAT.
MAT is exclusively applicable to companies and does not extend to individuals, HUFs, partnership firms, and similar entities. For foreign companies that generate profits through business operations in India, the provisions of Section 115JA apply.
As per the concept of MAT, the tax liability of a company will be higher of the following:
- Tax liability of the company computed as per the normal provisions of the Income-tax Act, that is, tax computed on the taxable income of the company by applying the tax rate applicable to the company. Tax computed in above manner can be termed as normal tax liability.
- Tax computed at 15 percent (plus surcharge and cess as applicable) on book profit (manner of computation of book profit is discussed in later part). The tax computed by applying 15 percent (plus surcharge and cess as applicable) on book profit is called MAT.
Features of MAT
| Topic | Details |
|---|---|
| Advance tax | According to the Income-tax Act 1961, taxpayers are required to make advance tax payments if their tax liability is INR 10,000 or more for a given financial year. Companies are obligated to pay advance tax under Section 115JB of the Act. |
| MAT credit | MAT credit is the excess tax paid by a company under the MAT clause, which can be carried forward for up to 15 years to set off against tax liability in subsequent years. |
| MAT applicability in Special Economic Zones (SEZs) | MAT did not apply to companies earning profits in SEZs when it was first introduced, but in 2011, the law was changed to include such companies under Section 115JB for MAT payment. |
| MAT report | All companies that are liable to pay MAT have to furnish a MAT report as prescribed in Form 29B. This report must be submitted along with their income tax return. |
Taxation on dividends
The taxation of dividends has now shifted to the ultimate shareholders from the earlier responsibility of the company under Dividend Distribution Tax (DDT).
TDS on dividends for residents
- TDS on dividends is now deducted only if aggregate dividend exceeds ₹10,000 in a financial year (raised from ₹5,000).
- TDS rate remains at 10 percent.
- No TDS if:
- Dividend is below ₹10,000, or
- Paid in non-cash form, or
- Valid Form 15G/15H is submitted by those below the basic exemption limit.
Taxation of dividends for non-residents
- TDS on dividends continues at 20 percent plus surcharge and cess.
- Eligible for DTAA benefit under Section 90(2) if applicable.
Buy-back tax
The Finance Acts of 2024 and 2025 maintain that any proceeds received by shareholders from a buy‑back carried out on or after 1 October 2024 will be treated as deemed dividend income, taxable in the hands of the recipient according to their income‑tax slab rates.
Companies are required to deduct 10 percent TDS for resident investors (and applicable rates for non‑residents, subject to DTAA).
The original cost of the repurchased shares is classified as a capital loss, which can be set off against other capital gains and carried forward for up to eight years.
Corporate Income Tax
Corporate tax is levied on the income earned by companies at a rate varying between 20-40%, depending on the companies’ particulars.
Any company registered under the Companies Act, or any foreign company that has its place of effective management in India will be considered as a domestic company. All income earned by a domestic company is taxed under corporate income tax. For foreign companies, only the income received or accrued in India is taxed under corporate taxation.
Withholding Tax
The applicable withholding tax rate is the rate prescribed in the Income Tax Act, 1961 or relevant Double Taxation Avoidance (DTA) Agreement, whichever is lower. Non-residents are liable to pay taxes in India on source income, including:
- Interest, royalties, and fees for technical services paid by a resident
- Salary paid for services rendered in India
- Income arising from a business connection or property in India.
Withholding tax (WHT), also called retention tax, is an obligation on the individual (either resident or non-resident) to withhold tax when making payments of a specified nature - such as rent, commission, salary, for professional services, to satisfy contract provisions, etc. – at rates specified in India’s tax regime.
Taxation on gaming
As gaming—both online and offline—continues to grow in India, tax authorities have introduced specific regulations to ensure proper tax compliance on winnings. Whether playing skill-based games, online betting, or traditional gambling, individuals must be aware of the tax implications under the Income Tax Act and the Goods and Services Tax (GST) framework.
Tax Deducted at Source (TDS) on gaming winnings
- TDS is deducted on winnings from offline betting, gambling, or lottery games if the total winnings exceed INR 10,000 in a financial year.
- If the winnings are below INR 10,000, no TDS is deducted.
- The TDS rate is a flat 30 percent on the total amount.
- No minimum threshold for online game winnings—TDS is deducted even on INR 1 won.
- The TDS rate is also 30 percent, applicable on the full amount won.
- Online platforms are responsible for deducting and depositing TDS before crediting winnings to the player's account.
Both skill-based and chance-based games are taxed at a uniform 28 percent GST rate. The tax is applied to:
- Gross Gaming Revenue (GGR) – The total revenue earned by the platform.
- Platform & Registration Fees – Charges imposed by gaming websites or apps.
Advance tax
Advance tax is a pay-as-you-earn system where taxpayers estimate their total income and tax payable for the year, and make advance tax payments at specified intervals during the financial year itself, as required by the Income-tax Act, 1961.
Although tax is deducted at source by the taxpayer in several cases, it may not cover the final tax amount that needs to be paid. Therefore, it's crucial for taxpayers to understand their obligation to pay advance tax and the consequences of non-payment or insufficient payment.
Who needs to pay advance tax?
Advance tax is payable during a financial year in every case where the amount of such tax payable by the taxpayer during that year is INR 10,000 or more.
Individuals not liable to pay advance tax
A resident senior citizen (an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax.
While salaried taxpayers are also covered for payment of advance tax, they are generally not required to pay advance tax as their employers are obligated to deduct withholding tax or TDS on their salaries. However, such a salaried person would still be liable to make advance tax payment on income under other heads such as dividend income, interest income, rental income, shortfall of TDS for salary income, etc.
Due dates to pay advance tax
The due dates for payment of different instalments of advance tax for both corporate as well as non-corporate assessee are as follows:
|
Due date |
Advance tax liability for |
|
June 15 |
15% of the tax liability |
|
Sept. 15 |
45% of the tax liability |
|
Dec. 15 |
75% of the tax liability |
|
March 15 |
100% of the tax liability |
Capital gains tax
It is levied on the transfer of a capital asset.
Capital gains are computed by deducting the cost of acquisition/improvement from the sale consideration. Capital gains are categorized into short-term capital gain (STCG) and long-term capital gain (LTCG) depending on the period of holding of the transferred asset.
Capital gains will be computed by reducing the cost of acquisition of the debenture and the expenditure incurred wholly or exclusively in connection with the transfer or redemption of such debenture from the sales consideration. Furthermore, no deduction is to be allowed for STT.
In 2024, India introduced substantial changes to its capital gains tax framework. These aim to simplify holding periods, revise tax rates, and improve compliance mechanisms for taxpayers, including residents and non-residents. While most changes took effect on July 23, 2024, adjustments to long-term classifications for gold and international funds are deferred until April 1, 2025.
Capital gains in India are taxed based on the holding period of the underlying capital asset, categorized as either short-term capital gains (STCG) or long-term capital gains (LTCG). The revised rules simplify the holding period classification as follows:
| Asset Type | Examples | Holding Period for Long-Term Classification | Short-Term Capital Gains (STCG) Tax Rate | Long-Term Capital Gains (LTCG) Tax Rate | Notes |
|---|---|---|---|---|---|
| Listed Assets |
• Listed stocks • Listed bonds • Equity ETFs • Gold ETFs • Bond ETFs • Real Estate Investment Trusts (REITs) • Infrastructure Investment Trusts (InvITs) |
More than 12 months | 20% | 12.5% | Uniform treatment for all listed instruments |
| Unlisted Assets |
• Real estate • Physical gold • Foreign shares |
More than 24 months | Taxed at applicable income tax slab rates | 12.5% (without indexation) | Slab rates vary by individual’s taxable income |
Updated tax treatment table
The Income Tax Department has revised the tax treatment framework for various capital market instruments. The updated regime introduces special tax rates based on asset class, taxpayer type, and income source:
|
Particulars |
Section 111A (STCG) |
Section 112A (LTCG) |
Section 115A (Royalty and Fee for Technical Services) |
Section 115AC (Bonds and GDRs in foreign currency) |
|
Eligible taxpayer |
All taxpayers |
All taxpayers |
NRIs and foreign companies |
NRIs |
|
Assets covered |
Equity shares, equity mutual funds, business trusts |
Same as STCG |
FCCBs, FCEBs, GDRs |
GDRs, bonds purchased in foreign currency |
|
Tax on STCG |
15% (before July 23, 2024); 20% (on or after July 23, 2024) |
- |
- |
- |
|
Tax on LTCG |
- |
10% (before July 23, 2024); 12.5% (on or after July 23, 2024) applicable on gains above INR 125,000 |
10%–20% (dividends); 4%–20% (interest); 20% (royalty/FTS) |
10% (interest/dividends) |
|
Basic exemption limit |
Available to resident individuals and HUFs |
Available to resident individuals and HUFs |
Not available |
Not available |
|
Chapter VI-A deductions under Income Tax Act |
Not allowed |
Not allowed |
Not allowed (except Sec. 80LA for IFSC units and FTS/royalty) |
Not allowed |
Updated indexation rules
Indexation benefits, which adjust an asset’s purchase cost for inflation, were largely abolished for transactions after July 23, 2024. However, taxpayers can choose between:
- A 20 percent LTCG tax with indexation for sales before the effective date, or
- A 12.5 percent LTCG tax without indexation.
This flexibility applies to specific asset categories, ensuring smoother transitions for taxpayers. The Cost Inflation Index (CII), used to calculate adjusted purchase prices, remains applicable for transactions under the older regime. Despite reforms, key exemptions under the Income Tax Act, 1961, continue to offer relief on LTCGs:
- Section 54: Exempts gains from residential property sales if proceeds are reinvested in a
new residential property within specified timelines. - Section 54EC: Allows exemptions for investments in specified bonds, like those issued
by REC or PFC, with a five-year lock-in period. - Section 54F: Covers reinvestments in residential properties for gains from non-residential
assets like shares and mutual funds.
Calculating capital gains for NRIs
Taxable income for NRIs includes:
- Salary received in India or for services provided in India;
- Income from house property in India;
- Capital gains from transferring assets situated in India; and,
- Interest from fixed deposits or savings accounts in India.
|
Income |
For transfers taking place before July 23, 2024/Rate of TDS |
For transfers taking place on or after July 23, 2024/ Rate of TDS |
|
Long-term capital gains referred to in section 115E |
10 percent |
12.5 percent |
|
Long-term capital gains referred to in sub-clause (iii) of clause (c) of subsection (1) of section 112 |
20 percent |
12.5 percent |
|
Long-term capital gains referred to in section 112A exceeding INR 100,000 (US$1194.3) |
10 percent |
12.5 percent |
|
Long-term capital gains [not being long term capital gains |
20 percent |
12.5 percent |
|
Short-term capital referred to in section 111A |
15 percent |
20 percent |
Taxation of virtual digital asset in India
India has a 30 percent tax rate on income from virtual digital assets, such as cryptocurrency and NFT. Income from transfer of VDA is taxable without deduction of any expenditure, allowance or set-off of loss, except cost of acquisition of such virtual asset, if any. Further, loss on the transfer of VDA can neither be carried forward nor be set off against any other income.
The virtual digital assets attracting the new tax liability include crypto assets like Bitcoin, Dogecoin, etc., Non-Fungible Tokens (NFTs), and includes any digital representation of value on a blockchain or equivalent technology—covering future crypto-like tokens and expansions.
Features of cryptocurrency tax in India
-
- From FY 2025–26 onward, crypto exchanges and users must report VDA transactions in the dedicated Schedule‑VDA section in ITR.
- A flat 30 percent tax (plus 4% cess) applies to income from virtual digital assets (VDAs), including cryptocurrencies (Bitcoin, Dogecoin, etc.) and Non-Fungible Tokens (NFTs).
- No deductions allowed, except for the cost of acquisition of the asset.
- Losses cannot be carried forward or set off against other income.
- Gifts of crypto assets are taxed at 30 percent, paid by the recipient.
FAQ:Common Compliances for Companies in the Indian Regulatory Landscape
What are the challenges companies face while ensuring that necessary regulatory compliances are completed?
Managing compliances in today’s highly complex economic and regulatory environment is no easy task. Companies face many challenges, including:
- Rapid globalization;
- Ongoing developments in tax and other allied laws;
- Changes in accounting standards;
- Increased demand from regulatory authorities for greater transparency and cooperation;
- Acute shortage of qualified professionals;
- Obtaining accurate data in an efficient manner;
- Global trends towards centralization of compliances; and
- An ever-evolving technology ecosystem.
Can you list a few common laws and legislations that are applicable to companies in India?
The following laws are applicable to companies:
- The Companies Act 2013 and Rules thereof;
- Labor and Employment Laws;
- Environmental Laws;
- Tax and Stamp Duty;
- Income Tax; and,
- Goods and Service Tax.
Can you explain the scope of compliances under Companies Act, 2013?
The scope of compliances under the Companies Act covers but is not limited to the following:
The Companies Act, amongst other provisions, lays down detailed guidelines regarding qualification and appointment/ removal of directors, retirement of directors, their remuneration, passing board resolutions, arranging board and shareholders meetings, oversight on related party transactions, timely maintenance of books of accounts and the preparation and presentation of annual accounts (matters that must be included in the annual reports of the companies), filing of forms with the Registrar of Companies periodically, etc.
Subsequent to the completion of all legal formalities required for incorporation, and the issuance of the certificate of incorporation, the company is recognized as a separate legal entity in the eyes of the law, distinct from its members who have incorporated the entity.
Whether it is a private or a public company, various things are supposed to be dealt with post incorporation. There are matters that must be undertaken in the first board meeting immediately post incorporation, and then there are tasks that are required to be carried out on a periodical basis.
A company conducts its business through its Directors who are accountable in the event of failure to comply with the above compliances.
Soon after a company is incorporated, but no later than 30 days, an appointed director is under obligation to call the First Board Meeting by issue of notice (together with the agenda) of the meeting at least seven days prior to the meeting. Several important matters need to be resolved in this first board meeting.
A company must also place its sign board outside the registered office address, with its name, registered office address, company identification number, e-mail ID, and phone number (mandatory fields as per the current mandate), Website address and fax number, if any, stated on it. These details must also be printed on all business letters, billheads, and all other official publications.
As mentioned under section 173(1) of the companies act of 2013, a company must convene at least four board meetings, in addition to the first board meeting, with a gap of no more than 120 days between two consecutive board meetings in a calendar year. Detailed minutes of the meetings should be prepared, recording the important actions taken by the Board of Directors and the same must be maintained as a permanent document by the company. Within 30 days from the meeting, the minutes must be prepared, duly signed, and maintained in a minute’s binder.
Similarly, on allotment of shares, the company must issue share certificates to those who have been allotted the shares and must maintain both a members register and a shares allotment register. A company is also required to file various financial statements along with the auditor’s report and annual return before the due date every financial year with the Registrar of Companies.
Additionally, there are several instances wherein a company has to intimate the concerned Registrar of Companies, on a timely basis, about the appointments/ removal of directors and certain other changes in a prescribed manner.
The above-mentioned compliance requirements under the Companies Act is not an exhaustive list. Some companies may also be required to ensure several other additional compliances such as registration under the GST, Professional Tax, and Shops and Establishment Act. It is important to understand that the responsibility of complying with the central and state by-laws is indeed, a continuous process.
What is the scope of compliances under Labor and Employment Legislation?
The scope of compliances under Labor and Employment Legislation covers, but is not limited to, the following:
Businesses with production lines, factories, must consider and comply with a host of statutes such as:
- The Employees' State Insurance Act, 1948
- The Maternity Benefits Act, 1961
- The Industrial Disputes Act, 1948
- The Contract Labor (Regulation and Abolition) Act, 1970
- The Trade Union Act, 1926
- The Equal Remuneration Act, 1976
- The Payment of Gratuity Act, 1972
- The Workmen’s Compensation Act, 1923
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- Professional Tax and Labor Welfare Fund.
The above statutes govern pressing issues such as duration of work, conditions of employed workers, minimum wages and remuneration, rights and obligations of the trade unions, insurance cover for employees, maternity benefits, employment retrenchment, payment of gratuity/provident fund, payment of bonus, and regulations of the contract labor, amongst other issues concerning employees.
However, many provisions of the existing labor laws trace their origins to the time of the British Colonial era, and with changing times, many of them have either became ineffective or do not have any contemporary relevance. Rather than protecting the interests of workers, these provisions ensured unwarranted difficulties for them.
The web of legislations back in the British colonial era were such that workers had to fill four different forms to claim a single benefit. Therefore, the present Government has repealed the outdated Labor Laws and has codified 29 of such labor Laws into four new Labor Codes.
For ensuring workers’ right to minimum wages, the Central Government has amalgamated 4 laws in the Wage Code, 9 laws in the Social Security Code, 13 laws in the Occupational Safety, Health and Working Conditions Code, 2020 and 3 laws in the Industrial Relations Code. By getting these Bills passed in the parliament, the Central Government has made significant headway in changing the standard of living of workers.
These labor reforms will enhance ease of doing business in the country. Employment creation and output of workers will also improve. The benefits of these four Labor Codes will be available to workers in both the organized and unorganized sector. Now, the Employees’ Provident Fund (EPF), Employees’ Pension Scheme (EPS) and coverage of all types of medical benefits under Employees’ Insurance will be available to all workers.
Companies must put consistent effort to ensure that proper compliance of these various statutes vis-à-vis the working condition for its employees are in order, and that the HR policies are formulated in accordance with the guidelines mentioned in the central and state by laws.
What is the scope of compliances under Environmental Laws?
The scope of compliances under Environmental Laws covers, but isn’t limited, to the following:
Environmental and pollution control matters fall under the ambit of various statutes such as:
- The Environment (Protection) Act, 1986
- The Water (Prevention and Control of Pollution) Act, 1974.
- The Air (Prevention and Control of Pollution) Act, 1981
- Hazardous Wastes (Management, Handling and Trans boundary Movement) Rules, 2008
- The Manufacture, Storage, and Import of Hazardous Chemicals Rules, 1989
- The Indian Forest Act, 1927
- The Forest (Conservation) Act, 1980
- The National Environment Tribunal Act, 1995
- The Public Liability Insurance Act, 1991, etc.
Companies are required to comply with the provisions of these environmental laws to the extent specifically applicable to their business operations. The consequences of non-compliance with the provisions of any such statutes and rules are provided in the respective statutes.
What is the scope of compliances under Tax and Stamp Duty related laws?
The scope of compliances under the Tax and Stamp Duty related laws covers, but is not limited, to the following:
There is a federal tax structure in India and taxes are levied by both the Central and State Governments, along with other local regulatory authorities. These taxes are broadly classified as:
- Direct Tax (which includes income tax, minimum alternate tax (MAT), share buy-back tax),
- Indirect Tax (which includes GST, Excise Duty, Customs Duty, Entry Tax, R&D Cess), and
- Charges on transactions (including stamp duty, securities transaction tax, and commodity transaction tax).
All Indian companies are subjected to payment of tax and stamp duty for their business transactions undertaken during any financial year and on the income generated from such operations. Delayed/ non-payment and inadequate payment of tax and stamp duty may attract moderate to heavy penalties, cause enforceability issue of the documents and, in some cases, impounding of the documents by the authority.
Apart from the ones mentioned above, are there any other enactments that are applicable for companies in India?
Whilst the above explained laws and enactments lays down the general laws governing a company in India, local state laws also play a very important role. Therefore, the need for companies to be mindful of adhering to local state laws in which they are registered and conducting their business must not be overlooked.
What are the consequences of non-compliance of the provisions of Acts and Enactments as mentioned above?
The policy and procedures regulating, and governing Indian corporations have been progressively liberalized and simplified over the last few years. However, there are several compliance mandates that must be adhered to, failure to do so could trigger various compliance risks such as disqualification of directors, attracting of penal provisions and in some cases even imprisonment of the directors and key management personnel.
What is compliance risk and how can companies manage it?
Compliance risk refers to an exposure to legal penalties, financial forfeiture, and the material loss an organization faces when it fails to act in accordance with industry laws and regulations, internal policies, or prescribed best practices. Compliance risk can also be referred to as integrity risk. Several compliance regulations are enacted to ensure that companies operate ethically and in a fair manner.
Compliance risk management constitutes the widely known collective governance, risk management, and compliance (GRC) discipline. The three fields have been known to overlap frequently in the areas of internal auditing, incident management, operational risk assessment, and compliance with regulations such as the Sarbanes-Oxley Act of United States. Penalties for compliance violations include payments for damages, fines, and voided contracts, which can lead to a loss of reputation and business opportunities for organisations, as well as devaluation of its franchises.
