Budget 2020 Analysis: Amendments in TDS Provisions

Amendment 1- Section 194A

Old Provision

Earlier, an individual or HUF was required to deduct and deposit the TDS only if it’s total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB. Limits under section 44AB were for business turnover, sales or gross receipts exceeding Rs. 1 crore and for profession gross receipts exceeding Rs. 50 lakhs.

Amended Provision

Now, the limit for business turnover under section 44AB has been proposed to be amended to Rs 5 crore IN THIS BUDGET. And, for individuals and HUFs words of section 194A has been changed from “limits mentioned under section 44AB” to “limits of Rs. 1 crore for business and Rs. 50 lakhs for profession”.

Now the limits for individuals and HUFs have been freezed and will not depends on the limits mentioned under section 44AB. So, limits for individuals and HUFs for the purpose of section 194A will remain same i.e. Rs. 1 crore for business and Rs. 50 lakhs for profession even after change in limits under section 44AB.

Amendment 2- Section 194A

Old Provision

Earlier, no TDS was required under section 194A on payment by co-operative societies (other than a co-operative bank) to its members or to any other co-operative society. Further, no TDS was required on income credited or paid in respect of-
a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank;

b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;
Amended Provision

Now, with above mentioned clauses, a proviso has been added which requires deduction of TDS by above mentioned persons, if following two conditions are satisfied-

a) If total sales, gross receipts or turnover of co-operative society exceeds Rs. 50 Lakhs in preceding financial year, and

b) Amount of interest credited or paid (or is likely to be credited or paid) is more than-

♣ Rs. 50,000 in case payee is senior citizen, or
♣ Rs. 40,000 in case of other payee

Amendment 3- Section 194C (Same amendment as done in 194A)

Old Provision

Earlier, an individual or HUF was required to deduct and deposit the TDS only if it’s total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB. Limits under section 44AB were for business turnover, sales or gross receipts exceeding Rs. 1 crore and for profession gross receipts exceeding Rs. 50 lakhs.

Amended Provision

Now, the limit for business turnover under section 44AB has been proposed to be amended to Rs 5 crore. And, for individuals and HUFs words of section 194C has been changed from “limits mentioned under section 44AB” to “limits of Rs. 1 crore for business and Rs. 50 lakhs for profession”.

Now the limits for individuals and HUFs have been freezed and will not depends on the limits mentioned under section 44AB. So, limits for individuals and HUFs for the purpose of section 194C will remain same i.e. Rs. 1 crore for business and Rs. 50 lakhs for profession even after change in limits under section 44AB.

Note: Exactly same amendment has been also been done in section 194H, 194I and 194J.

Budget 2020 Analysis: Amendments in TDS Provisions | Business turnover under section 44AB

Amendment 4- Section 194J

Old Provision

Earlier, rate of TDS under section 194J was 10% for following payments-

• Fees for professional services, or
• Fees for technical services, or
• Any remuneration or fees or commission to director other than covered u/s 192,
• Royalty,
• Any sum referred to in clause (va) section 28

Amended Provision

After amendment TDS rate on fees for technical services will changed to 2% while on other clauses mentioned above will remain unchanged at 10%.

Amendment 5- Introduction of new section 194K

Person responsible for paying to resident any of the following income shall, at the time of payment or credit the same in his account, deduct TDS at 10%, if amount thereof exceeds Rs. 5000/-

• Income in respect of units of a Mutual Fund specified under clause (23D) of section 10, or
• Units from the Administrator of the specified undertaking, or
• Units from the specified company.

Amendment 6- Introduction of new section 194O

Where a person (e-commerce participant) sales goods/provide services on a digital platform through an e-commerce operator, then that e-commerce operator shall, at the time of making credit or payment in the account of e-commerce participant, deduct TDS at 1% on gross amount of gross amount of sales.

For example- Mr. X has made his goods listed on amazon web site. In this case Mr. X is an e-commerce participant and amazon is an e-commerce operator. When some goods of Mr X are sold on web site of amazon, it is liable to pay sale amount of that sale of Mr. X. Now, amazon is required to deduct TDS on such sum which it needs to pay to Mr. X.

Other important things to be kept in mind about section 194O

• Any payment made by the purchaser directly to e-commerce operator shall be deemed to be the amount paid or credited by e-commerce operator in the account of e-commerce participant. Thus, liable for TDS deduction;
• TDS not required in case of e-commerce participant being an individual or HUF if following conditions are satisfied-
♣ Gross amount of sale or services does not exceeds Rs. 5 lakhs during previous year; and
♣ Such e-commerce participant has furnished his PAN or Aadhaar number with e-commerce operator.
• Services includes fees for technical services and fees for professional services as defined u/s 194J,
• This section overrides all other provisions of part B of chapter XVII i.e. collection and recovery of tax.