Budget 2016: Under the scheme of deduction of tax at source as provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.

In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 3 and table 4 respectively.

Table 3: Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act

Present SectionHeadsExisting Threshold
Limit (Rs.)
Proposed Threshold Limit
(Rs.)
1 92APayment of accumulated balance due to an employee30,00050,000
194BBWinnings from Horse Race5,00010,000
194CPayments to ContractorsAggregate annual limit of 75,000Aggregate annual limit of 1,00,000
194LAPayment of Compensation on acquisition of certain Immovable Property2,00,0002,50,000
194DInsurance commission20,00015,000
194GCommission on sale of lottery tickets1,00015,000
194HCommission or brokerage5,00015,000

Table-4 : Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

Present SectionHeadsExisting Rate
of TDS (%)
Proposed Rate of
TDS (%)
194DAPayment in respect of Life Insurance Policy2%1%
194EEPayments in respect of NSS Deposits20%10%
194DInsurance commissionRate in force (10%)5%
194GCommission on sale of lottery tickets10%5%
194HCommission or brokerage10%5%

The following provisions which are not in operation are proposed to be omitted as detailed in Table 5.

Table 5: Certain non-operational provisions to be omitted

Present SectionHeadsProposal
194KIncome in respect of UnitsTo be omitted w.e.f 01 .06.2016
194LPayment of Compensation on acquisition of Capital AssetTo be omitted w.e.f 01 .06.2016

These amendments will take effect from 1stJune, 2016.

Clause 70 of Finance Bill 2016

Clause70 of the Bill seeks to amend section 1 92A of the Income-tax Act relating to payment of accumulated balance due to an employee.

Under the existing provisions contained in the aforesaid section, no deduction of income-tax shall be made where the amount of income relating to accumulated balance due to an employee credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee does not exceed thirty thousand rupees.

It is proposed to enhance the said threshold limit from thirty thousand rupees to fifty thousand rupees.

This amendment will take effect from 1st June, 2016.

Clause 79 of Finance Bill 2016

Clause 79 of the Bill seeks to amend section 194LA of the Income-tax Act relating to payment of compensation on acquisition of certain immovable property.

The existing provisions of the aforesaid section, inter alia, provide that no deduction shall be made in case where the amount of compensation or aggregate of such sum relating to acquisition of immovable property (other than agricultural land), credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee does not exceed two hundred thousand rupees.

It is proposed to enhance the said threshold limit from two hundred thousand rupees to two lakh and fifty thousand rupees.

This amendment will take effect from 1st June, 2016.

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