TDS/TCS Rates Changes Proposed in Budget 2024

TDS and TCS are two of the government’s most significant sources of income. And, it is essential for businesses to make such timely tax payments in order to avoid penalties and remain compliant.

In Budget 2024, the government changed the TDS/ TCS rates. Let’s understand it.

For Revised TDS’ Rates

For TCS’s Credit against Salaries

• Applicable from October 01, 2024.
• Now employers are required to allow Tax Collected at Source (TCS) under chapter XVII-BB while computing TDS liability for employees to improve their cash flow management.

For Increased Penal Interest against Delay TCS’s Payment

• Applicable from April 01, 2025.
• Now TCS Collectors are required to pay penal interest @ 1.5% per month for TCS’s non-deposit with govt. under section 206C(7) of ITA, 1961.

For Credit against a Minor’s TCS

• Applicable from January 01, 2025.
• Now parents are permitted to claim a minor’s TCS under section 206C(1G) when the minor’s incomes are also clubbed in the parent’s hands under section 64(1A) of ITA, 1961.

For TDS @ 10% on Payments to Partners

• Applicable from 1st April 2025.
• Now Partnership firms are required to deduct TDS @ 10% on payments to partners at the time of credit or payment whichever is earlier when aggregate annual payments exceed INR 20 thousand under Section 194T of ITA, 1961
• Above mentioned payments for TDS purposes include certain items:

(a) Salaries
(b) Remunerations
(c) Bonuses
(d) Commissions
(e) Interest on loans
(f) Interest on capital
(g) Etc

For TCS @ 1% on Luxury Goods Sales

• Applicable from January 01, 2025 / AY-2025-26.
• Now luxury goods’ sellers are required to collect TCS @ 1% when a good’s price is exceeding INR 10 lacs under section 206C(1F) of ITA, 1961
• Govt. is required to notify the list of luxury goods for the above-mentioned TCS purpose.

For TDS @ 1% on Immovable Property’s Sales

• Applicable from October 01, 2024 / AY-2025-26.
• 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 exist.

For TDS @ 10% on Floating Rate Savings (Taxable) Bonds (FRSB) 2020

• Applicable from October 01, 2024 / AY-2025-26.
• Now introduced TDS @ 10% on FRSB 2020 when aggregate annual interest paid or payable is exceeding INR 10 thousands.
• Now introduced TDS @ 10% on Other Specified Securities (OSS) duly notified by govt. when aggregate annual interest paid or payable is exceeding INR 10 thousands.

For TDS @ 10% on payments against work contracts (Section 194J(1))

• Applicable from October 01, 2024 / AY-2025-26.
• Now 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.

For Processing of statements filed by exchanges (Form 26QF)

• Applicable from 1st April 2025.
• Now CBDT is required to establish a scheme under section 200A of ITA, 1961 for processing of statements filed by the stock exchange in Form 26QF.

For Lower TDS + also TCS certificate (both) (Section 194Q + 206C(1H))

• Applicable from October 01, 2024 / AY-2025-26
• 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.
• 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.

For TCS Exemptions

• Applicable from October 01, 2024 / AY-2025-26.
• Now govt. is permitted to notify certain persons + also classes of persons like institutions or associations or class of institutions or associations or bodies (any) for 0% (zero) TCS or lower TCS rate.