The Union Budget 2024 has introduced significant amendments to the Tax Deducted at Source (TDS) provisions concerning various types of commissions, with changes set to take effect from 1st October 2024. These amendments will impact those involved in insurance, lottery, and brokerage businesses. Here’s a detailed look at the new TDS rates under sections 194D, 194G, and 194H.
Also Read Detailed TDS Rate chart for FY 2024-25 applicable w.e.f 1 October 2024
Section 194D – Payment of Insurance Commission
Current Provision: Under section 194D, any person responsible for paying to a resident any income by way of remuneration or reward, whether by commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal, or revival of insurance policies), is required to deduct TDS at the rate of 5%. This deduction must be made at the time of crediting the income to the account of the payee or at the time of payment, whichever is earlier.
Amendment: The TDS rate under section 194D for individuals or entities other than companies is proposed to be reduced from 5% to 2%. This reduction aims to ease the tax burden on those receiving insurance commissions and to promote the insurance sector.
Effective Date: The amendment will come into effect from 1st April 2025.
Section 194G – Commission on Sale of Lottery Tickets
Current Provision: Section 194G requires any person responsible for paying income exceeding Rs 15,000 as commission, remuneration, or prize for stocking, distributing, purchasing, or selling lottery tickets to deduct TDS at the rate of 5%. This deduction must be made at the time of crediting the income to the account of the payee or at the time of payment, whichever is earlier.
Amendment: The TDS rate under section 194G is proposed to be reduced from 5% to 2%. This change is designed to provide relief to those involved in the lottery business by lowering the tax burden on their commissions and prizes.
Effective Date: The amendment will take effect from 1st October 2024.
Section 194H – Payment of Commission or Brokerage
Current Provision: Section 194H applies to individuals or Hindu Undivided Families (HUFs) responsible for paying income by way of commission (excluding insurance commission covered under section 194D) or brokerage to a resident. The current TDS rate under this section is 5%, and the deduction must be made at the time of crediting the income to the account of the payee or at the time of payment, whichever is earlier.
Proposed Amendment: The TDS rate under section 194H is also proposed to be reduced from 5% to 2%. This reduction is expected to benefit businesses and professionals in brokerage services by reducing their TDS liability.
Effective Date: The amendment will take effect from 1st October 2024.
Impact of the Amendments
These amendments reflect the government’s intent to reduce the TDS burden across various sectors. The reduction in TDS rates from 5% to 2% across sections 194D, 194G, and 194H will likely increase the cash flow for those receiving such commissions and income, thereby encouraging business activities in insurance, lottery, and brokerage sectors.
Taxpayers involved in these areas should take note of the new rates and ensure compliance starting from the specified effective dates. Additionally, businesses should update their accounting systems and processes to align with the new TDS rates to avoid any penalties or interest due to non-compliance.
Also there is Change in TDS rate on Rent, watch below Video:
All TDS/TCS Changes from 1 October 2024:
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