Along with TDS deduction by employers, salaried individuals also face TCS collected from them under various other transactions.
A small tinkering with tax slabs and an increase of Rs 25,000 in standard deduction in the Budget will most likely fall short of the expectations of salaried individuals.
However, a few other changes on tax deducted at source (TDS) and tax collected at source (TCS) give some added benefits to the taxpayers.
Lower TDS on rent paid
The Budget has proposed to cut the rate of TDS to 2 per cent from 5 per cent earlier for rents paid in excess of Rs 50,000 by an individual or Hindu undivided family (HUF), for a month or part thereof.
Many households, especially those of retired individuals, depend on rental income. They will get more rent in hand. “The reduction in TDS will be beneficial for property owners renting out their property, especially senior citizens who rely on rental income. They will have better cash flow,” said Sudhir Kaushik, co-founder and chief executive officer (CEO), Taxspanner.com.
This change becomes effective from October 1, 2024.
Credit for TCS of salaried employees
Along with TDS deduction by employers, salaried individuals also face TCS collected from them under various other transactions. The Budget has proposed that from October 1, 2024, all such TCS collected and other TDS deducted from the employee can be considered while deducting tax at source on salary.
“Earlier there was no provision for considering TCS collected from the taxpayer for overall tax computation. Now, credit will be given by the employer for TCS already collected to consider net tax to be deductible. It will benefit the salaried class,” said Jatin Kumar, senior manager, direct tax, Felix Advisory.
This should also reduce the compliance burden for many salaried individuals.
TDS on sale of immovable property
Buyers of residential property priced at more than Rs 50 lakh have to deduct TDS at 1 per cent of the price paid. However, earlier the transactions could be structured by splitting the share of the buyer or seller to avoid TDS.
For example, the buyer of a house property owned by two individuals at Rs 60 lakh, was not deducting any TDS because he/she would pay Rs 30 lakh to each joint owner, which is below the Rs 50-lakh threshold.
Budget 2024 has made it clear that the TDS must be deducted on the price of the immovable property above Rs 50 lakh, irrespective of the number of sellers (or joint owners) in the property. The amendment comes into effect from October 1, 2024.
“The TDS will now be based on the property value and not on individual share in the property. This provision plugs a loophole in the law which was being legally taken advantage of during property transactions. The government will be the beneficiary here,” Kaushik said.
TCS credit for minor child
While income of a minor child was getting clubbed with income of the parent for income tax, credit for TCS collected from a minor child’s income was not allowed to be used by the parents while computing their tax liability.
Effective January 1, 2025, TCS of a minor child will be allowed to be claimed by the parent if the income of the child is clubbed with the parent. This should ensure that parents holding taxable investment income such as interest on fixed deposits in the name of a minor child can claim the TCS in the name of the minor, while paying tax in their name.
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