New TDS/TCS Rates FY 2024-25| All Major Changes in TDS and TCS of Budget 2024

There are various provisions of Tax Deduction at Source (TDS) with different thresholds and multiple rates between 0.1%, 1%, 2%, 5%, 10%, 20%, 30% and above. To improve ease of doing business and better compliance by taxpayers, the TDS rates are proposed to be reduced. However, no change would occur with respect to sections such as TDS on salary, TDS on virtual digital assets, TDS on winnings from lottery etc/ race horses, payment on transfer of immovable property and payments to non-residents, TDS rates for TDS on contracts etc

Section 194D – Payment of Insurance Commission

1. Current Provisions:
   • Any person responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal, or revival of policies of insurance) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force, which is presently 5% (in case of a person other than a company).
2. Proposed Changes:
   • TDS under section 194D of the Act (in case of a person other than a company) is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of April 2025.

Section 194DA – Payment in Respect of Life Insurance Policy

1. Current Provisions:
   • Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax thereon at the rate of 5% on the amount of income comprised therein.
2. Proposed Changes:
   • TDS under section 194DA of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194G – Commission, etc on Sale of Lottery Tickets

1. Current Provisions:
   • Any person who is responsible for paying, on or after the 1st day of October 1991, to any person who is or has been stocking, distributing, purchasing, or selling lottery tickets, any income by way of commission, remuneration, or prize (by whatever name called) on such tickets in an amount exceeding fifteen thousand rupees shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%.
2. Proposed Changes:
   • TDS under section 194G of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194H – Payment of Commission or Brokerage

1. Current Provisions:
   • Any person, not being an individual or a Hindu undivided family (as specified), who is responsible for paying, on or after the 1st day of June 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%.
2. Proposed Changes:
   • TDS under section 194H of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194-IB – Payment of Rent by Certain Individuals or HUF

1. Current Provisions:
   • Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income-tax thereon.
2. Proposed Changes:
   • TDS under section 194-IB of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194M – Payment of Certain Sums by Certain Individuals or HUF

1. Current Provisions:
   • Any person, being an individual or a Hindu undivided family (other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H, or section 194J) responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services during the financial year, shall, at the time of credit of such sum or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 5% of such sum as income-tax thereon.
2. Proposed Changes:
   • TDS under section 194M of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194-O – Payment of Certain Sums by E-commerce Operator to E-commerce Participant

1. Current Provisions:
   • Section 194-O of the Act provides that notwithstanding anything to the contrary contained in any of the provisions of Chapter XVII-B, where the sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of the amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of 1% of the gross amount of such sales or services or both.
2. Proposed Changes:
   • Reduction of the TDS rate under section 194-O from 1% to 0.1%.
3. Reason for Changes:
   • Representations received that offline transactions attract a lower TDS rate of 0.1% (under section 194Q relating to TDS on payment of certain sums for the purchase of goods) or tax collection at source (TCS) rate of 0.1% (under section 206C(1H) relating to TCS on receipts from the sale of goods). To bring parity between these provisions, the reduction is proposed.
4. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Section 194F – TDS on Payments on Repurchase of Units by Mutual Fund or UTI

1. Proposed Changes:
   • It is proposed to omit section 194F relating to TDS on payments on repurchase of units by Mutual Fund or UTI, which attracts a TDS rate of 20%.
2. Effective Date:
   • The amendment will take effect from 1st day of October 2024.

Ease in Claiming Credit for TCS Collected/TDS Deducted by Salaried Employees

1. Current Provisions:
   • Section 192 of the Act provides for the deduction of tax at source on salary income. Further, sub-section (2B) of section 192 of the Act provides for consideration of income under any other head and tax, if any, deducted thereon to be taken into account for the purposes of making the deduction under sub-section (1) of the aforesaid section, subject to certain conditions.
2. Proposed Changes:
   • It is proposed that sub-section (2B) of section 192 may be amended to expand the scope of the said sub-section to include any tax deducted or collected under the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, to be taken into account for the purposes of making the deduction under sub-section (1) of section 192.
3. Reason for Changes:
   • Representations have been received that credit of TCS paid should be allowed while computing the amount of tax to be deducted on salary income of the employees as this will help in avoiding cash flow issues for employees. Similarly, all TDS may be taken into account for the purpose of deduction of tax from the salary income of employees. Moreover, when the TCS etc is not taken into account, the same is required to be claimed as a refund by the employee, which adds to the compliance process.
4. Effective Date:
   • The amendments will take effect from the 1st day of October, 2024.

Alignment of Interest Rates for Late Payment to Government Account of TCS

1. Current Provisions:
   • Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcoholic liquor, forest produce, scrap, etc. Sub-section (7) of section 206C provides that persons who fail to collect tax or after collecting, fail to deposit the same to the credit of the Central Government shall be liable to pay simple interest at the rate of one percent for every month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was paid.
2. Proposed Changes:
   • To align the rate of simple interest charged on failure to pay to Government account after the collection of tax, it is proposed to amend sub-section (7) of section 206C to specify that simple interest for non-payment of tax collected at source to the Government account is to be increased from one percent to one and one-half percent for every month or part thereof on the amount of such tax from the date on which such tax was collected to the date on which such tax is actually paid.
3. Reason for Changes:
   • The rates of interest applicable for late collection/deposit of TCS are not in line with the provisions of sub-section (1A) of section 201 pertaining to late deduction/deposit of TDS. A higher interest rate of 1.5% is applicable where tax has been deducted but not been deposited to the Government account due to the gravity attached to the failure, as it deprives the deductee of due tax credit and does not reach the Central Government in time. The same difficulty is also faced by the collectee.
4. Effective Date:
   • The amendment will take effect from the 1st day of April, 2025.

TDS on Payment of Salary, Remuneration, Interest, Bonus, or Commission by Partnership Firm to Partners – New Section 194T

1. Current Provisions:
   • Presently, there is no provision for deduction of tax at source (TDS) on payment of salary, remuneration, interest, bonus, or commission to partners by the partnership firm.
2. Proposed Changes:
   • It is proposed that a new TDS section 194T may be inserted to bring payments such as salary, remuneration, commission, bonus, and interest to any account (including the capital account) of the partner of the firm under the purview of TDS for aggregate amounts more than Rs 20,000 in the financial year. The applicable TDS rate will be 10%.
3. Effective Date:
   • The provisions of section 194T of the Act will take effect from the 1st day of April, 2025.
   • [Clause 62]

TCS under Sub-section (1F) of Section 206C on Notified Goods

1. Current Provisions:
   • The existing provisions of section 206C of the Act provide for the collection of tax at source on business of trading in alcoholic liquor, forest produce, scrap, etc. Sub-section (1F) provides that every person, being a seller, who receives any amount as consideration for the sale of a motor vehicle of value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer a sum equal to one percent of the sale consideration as income-tax.
2. Proposed Changes:
   • It is proposed to amend sub-section (1F) of section 206C to also levy TCS on any other goods of value exceeding ten lakh rupees, as may be notified by the Central Government in this behalf. Such goods would be in the nature of luxury goods.
3. Reason for Changes:
   • There has been an increase in expenditure on luxury goods by high net worth persons. For proper tracking of such expenses and in order to widen and deepen the tax net, this amendment is proposed.
4. Effective Date:
   • The amendment will take effect from the 1st day of January, 2025.
   • [Clause 70]

Amendment of Provisions of TDS on Sale of Immovable Property

1. Current Provisions:
   • Section 194-IA of the Act provides for deduction of tax on payment of consideration for the transfer of certain immovable property other than agricultural land.
   • Sub-section (1) provides that any person responsible for paying to a resident any sum by way of consideration for the transfer of any immovable property shall, at the time of credit or payment of such sum to the resident, deduct an amount equal to one percent of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon.
   • Sub-section (2) provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property are both less than fifty lakh rupees.
2. Issue Identified:
   • Some taxpayers are interpreting that the consideration being paid or credited refers to each individual buyer’s payment rather than the total consideration paid for the immovable property. Hence, if the buyer is paying less than Rs. 50 lakh, no tax is being deducted, even if the value of the immovable property and stamp duty value exceed Rs. 50 lakh. This is against the intention of the legislature.
3. Proposed Changes:
   • It is proposed to amend sub-section (2) of section 194-IA to clarify that where there is more than one transferor or transferee in respect of an immovable property, then such consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.
4. Effective Date:
   • The amendments will take effect from the 1st day of October, 2024.
   • [Clause 58]

Tax Deduction at Source on Floating Rate Savings (Taxable) Bonds (FRSB) 2020

1. Current Provisions:
   • Section 193 of the Act provides for deduction of tax at source on payment of any income to a resident by way of interest on securities.
2. Proposed Changes:
   • The Government has introduced Floating Rate Savings (Taxable) Bonds (FRSB) 2020. The provisions of section 193 of the Act are proposed to be amended to allow for deduction of tax at source at the time of payment of interest exceeding ten thousand rupees on these bonds. I. the Floating Rate Savings Bonds (FRSB) 2020 (Taxable) and II. any security of the Central Government or State Government, as the CentralGovernment may, by notification in the Official Gazette, specify in this behalf.
3. The amendments will take effect from the 1st day of October, 2024.

Excluding sums paid under section 194J from section 194C (Payments to
Contractors)

Section 194C of the Act provides for TDS on payments to contractors at the rate of 1% when the payment is being made or credit is being given to an individual or HUF and 2% in other cases. Section 194J of the Act relates to TDS on fees for professional or technical services wherein the applicable TDS rates are 2% or 10% depending on the nature of payment being made.

Clause (iv) of the Explanation of section 194C defines “work” to specify which all activities would attract TDS under section 194C. However, there is no explicit exclusion of assessees who are required to deduct tax under section 194J from requirement or ability to deduct tax under section 194C of the Act. Therefore 52 some deductors are deducting tax under section 194C of the Act when in fact they should be deducting tax under section 194J of the Act.
In view of the above, it is proposed to explicitly state that any sum referred to in sub-section (1) of section 194J does not constitute “work” for the purposes of TDS under section 194C.

The amendment will take effect from 1st day of October 2024.

Extending the scope for lower deduction/collection certificate of tax at source

1. Section 197 of the Act provides that payments on which tax is required to be deducted under certain sections of Chapter XVII-B are eligible for a certificate for deduction at a lower rate. Further, sub-section (9) of section 206C of the Act provides that sums on which tax is required to be collected under sub-section (1) or sub-section (1C) are eligible for collection of tax at a lower rate.
2. Section 194Q of the Act requires every person being a buyer, who pays to a resident, being the seller, for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year, to deduct tax at the rate of 0.1% of such sum exceeding fifty lakh rupees.
3. Further, sub-section (1H) of section 206C of the Act requires every person being a seller, who receives any amount as consideration for the sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than exceptions given therein, to collect tax at the rate of 0.1% of such consideration exceeding fifty lakh rupees.
4. Representations have been received that there are instances where the taxpayers are incurring losses and due to tax deducted under section 194Q of the Act, their funds are getting blocked. Moreover, the tax deducted has to be refunded in such cases. It is also stated that there is additional compliance as a seller liable for TCS needs to also verify whether the buyer has deducted tax or not.
5. Therefore, to facilitate ease of doing business and to provide an option to seek a lower deduction certificate so as to reduce compliance burden on the assessee, it is proposed: a) to amend sub-section (1) of section 197 to bring section 194Q in its ambit. b) to amend sub-section (9) of section 206C to bring sub-section (1H) of section 206C in its ambit.
6. The amendments will take effect from the 1st day of October 2024.

Notification of certain persons or class of persons as exempt from TCS

1. Section 206C of the Act provides for the collection of tax at source on the business of trading in alcoholic liquor, forest produce, scrap, etc.
2. Representations have been received that there can be entities whose income is exempt from taxation and are not required to furnish returns of income. However, they face difficulty as tax is being collected on transactions carried out by them. They state that there is no provision in the Act for them to be exempted from the TCS provisions.
3. It is therefore proposed to provide that no collection of tax shall be made or that collection of tax shall be made at such lower rate in respect of specified transactions, from such person or class of persons, including institution, association, or body or class of institutions, associations, or bodies, as may be notified by the Central Government in the Official Gazette, in this behalf.
4. The amendment will take effect from the 1st day of October 2024. [Clause 70]

Time limit to file correction statement in respect of TDS/TCS statements

1. Section 200 of the Act lists the duty of the person deducting tax under the provisions of Chapter XVII-B. Sub-section (3) of this section requires that a deductor, after paying the tax deducted to the credit of the Central Government, shall prepare statements detailing the TDS deducted and furnish it within the prescribed time to the prescribed authority. The proviso to section 200 states that a person may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete, or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be specified by the authority.
2. Section 206C of the Act provides for the collection of tax at source (TCS) on the business of trading in alcoholic liquor, forest produce, scrap, etc. Proviso to sub-section (3) of section 206C of the Act requires that a person collecting tax after paying the tax collected to the credit of the Central Government, furnish statements detailing the TCS collected within the prescribed time. Sub-section (3B) of the said section requires that the person collecting tax may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete, or update the information furnished in the statement delivered under the proviso to sub-section (3) in such form and verified in such manner, as may be specified by the authority.
3. While there is a time limit for furnishing statements detailing the TDS/TCS, there is no time limit for furnishing correction statements. Hence, such statements may be revised multiple times indefinitely, and thus these provisions may be misused causing difficulty to deductees/collectees. Accordingly, in order to put certainty and finality on the filing process of TDS and TCS statements, it is proposed to amend section 200 and sub-section (3B) of section 206C to provide that no correction statement shall be delivered after the expiry of six years from the end of the financial year in which the statement referred to in sub-section (3) of section 200 and the statement referred to in the proviso to sub-section (3) of section 206C are respectively delivered.
4. The amendments will take effect from the 1st day of April 2025. [Clauses 67 & 70]

Penalty for failure to furnish statements

1. Section 271H of the Act inter alia relates to penalty for failure to file Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) returns/statements within the due date. Sub-section (3) of section 271H of the Act states that no penalty shall be levied if the person proves that after paying TDS/TCS along with fees and interest to the credit of the Central Government, the person has filed the TDS/TCS statement before the expiry of period of one year from the time prescribed for furnishing such statement.
2. While earlier the due date to file a belated return by the assessee was one year from the end of the assessment year, the time limit presently is 31st December of the same assessment year. Deductees/collectees face great inconvenience if the TDS/TCS statements by deductors/collectors are not furnished in time leading to mismatch in TDS/TCS during processing of income tax returns and raising of infructuous demands.
3. To ensure better compliance, it is proposed to amend sub-section (3) of section 271H to provide that no penalty shall be levied if the person proves that after paying TDS/TCS along with fees and interest to the credit of the Central Government, he has filed the TDS/TCS statement before the expiry of period of one month from the time prescribed for furnishing such statement.
4. This amendment will take effect from the 1st day of April 2025.

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