TDS and TCS are two of the government's main sources of revenue. Government proposed changes to the TDS/ TCS rates and other changes proposed in Budget 2024.
Reetu | Aug 29, 2024 |
TDS/TCS Rates and Other Changes w.e.f. 1st October 2024
TDS and TCS are two of the government’s main sources of revenue. And, it is critical for businesses to make timely tax payments in order to avoid penalties and stay compliant.
TDS, or Tax Deducted at Source, is an income tax levied on certain payments such as rent, salary, commission, interest, and professional fees. The individual paying the amount should deduct TDS from the payment.
Tax collected at source (TCS) is the tax that the seller collects from the customer during the sale and deposits with the tax authorities. Section 206C of the Income-tax Act covers the goods for which the seller must collect tax from the customer.
In the Union Budget 2024, the government proposed changes to the TDS/ TCS rates and other changes. Let’s have a look at these changes.
Section 193
Under this section, TDS is deducted for Payments for interest on Floating Rate Savings (Taxable) Bonds (FRSB) 2020. The TDS rate is revised from 0% to 10%. It will be applicable from 1st October 2024.
Section 194DA
This section deducts the TDS for Payments for life insurance policies. The revised TDS rate is 2% which will be applicable from 1st October 2024.
Section 194F
The 194F Section deducts TDS for Payments for re-purchase of units by mutual fund or UTI. The TDS rate has been revised from 20% to 0% applicable from 1st October 2024.
Section 194G
For Payments for commission etc. on the sale of lottery tickets, TDS is deducted under Section 194G. The government decided the new rate of TDS as 2% and will be in effect from 1st October 2024.
Section 194H
194H Section covers the deduction of TDS on Payments for commission or brokerage. The new rate of TDS is 2% and will be applicable from October 1, 2024.
Section 194-IB
Payments for rent by certain individuals / HUF attract TDS deduction under this section and a new rate of 2% will be applicable w.e.f. 1st October 2024.
Section 194M
The 194M Section deducts TDS for Payments for certain sums by certain individuals/ HUF. The TDS rate revised from 5% to 2%% and will be applicable from 1st October 2024.
Section 194-O
Deduction of TDS for the Payments for certain sums by e-commerce operators to e-commerce participants is covered under Section 194-O with a new TDS rate of 0.1% and will be in effect from 1st October 2024.
TCS’s Credit against Salaries
Under this, employers are now required to allow Tax Collected at Source (TCS) under chapter XVII-BB while computing TDS liability for employees to improve their cash flow management.
Deduction of TDS @ 1% on Immovable Property’s Sales
TDS will be deducted @1% on Sales of Immovable Properties. It is now clarified that threshold limits INR 50 lacs for TDS @ 1% is to apply on the aggregate amount paid or payable (any) by 100% transferees to 100% transferors against 1 immovable property under section 194-IA(2) of ITA, 1961.
Hence clarified that the above-mentioned threshold limit is applicable for 1 property besides multiple transferees and/or multiple transferors. This will be applicable from October 01, 2024 / AY-2025-26.
TDS @ 10% on payments against work contracts (Section 194J(1))
The TDS deduction on payments against work contracts under Section 194J(1) will be at the rate of 10%. It is clarified that payments covered under section 194J(1) are not to be considered work contracts for TDS @ 2% under section 194C of ITA, 1961. Hence clarified that payments covered under section 194J(1) are to be considered professional services for TDS @10% under section 194J of ITA, 1961. This will be applicable from October 01, 2024 / AY-2025-26.
Lower TDS + also TCS certificate (both) (Section 194Q + 206C(1H))
New changes approved that now the taxpayer is permitted to obtain a lower TDS certificate to include section 194Q also under section 197 of ITA, 1961 when TDS @ 0.1% is applicable on payments for purchases are to be made to residents in India when annual aggregate is exceeding INR 50 lacs.
Also, now the taxpayer is permitted to obtain a lower TCS certificate to include section 206C(1H) also under section 206C(9) of ITA, 1961 where TCS @ 0.1% is applicable on receipts for sales are to be made to residents in India when annual aggregate is exceeding INR 50 lacs.
Both changes will be in effect from 1st October 2024.
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