The Union Budget 2024-25 has introduced several key changes in the regulations for Tax Deducted at Source (TDS), aiming to enhance compliance and simplify tax procedures. These changes impact various sections of the Income Tax Act, including 271H, 200, 197, 194-IA, and others. Understanding these amendments is crucial for taxpayers to navigate the new landscape effectively and ensure timely compliance.
Changes in TDS proposed in Union Budget 2024-25
| Section | Head | Existing Provision | Proposed Provision |
| 271H | The provisions of section 271H of the Income Tax Act penalizes the Deductor / Collector who fails to furnish the Tax Deducted at Source (TDS) return or Tax Collected at Source (TCS) return within the prescribed due dates. Section 271H also penalizes the Deductor / Collector who furnishes incorrect information while filing the TDS / TCS return | In case the penalty provisions of section 271H get applicable, the defaulter would be liable to pay a minimum penalty amount of INR 10,000, however, the maximum penalty amount may extend till INR 1,00,000.
The penalty under section 271H of the Income Tax Act cannot be levied if all the following conditions are satisfied – 1. The TDS or TCS is paid to the credit of the Government; 2. The Deductor /collector has paid late filing fees and applicable interest to the credit of the Government; and 3. The TDS or TCS return is filed before the expiry of one year from the specified due dates. Further, provisions of section 273B of the Income Tax Act states that in case the defaulter (Deductor / Collector) provides reasonable cause for the failure, then no penalty can be levied under section 271H. |
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
This amendment will take effect from the 1st day of April, 2025 |
| 200 | Time limit to file correction statement in respect of TDS/ TCS statements | There is no time limit for furnishing correction statements and such statements may be revised multiple times indefinitely | 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 statement referred to in the proviso to sub-section (3) of section 206C are respectively delivered.
The amendments will take effect from the 1st day of April, 2025 |
| 197 | Extending the scope for lower deduction / collection certificate of tax at source | Section 194Q & Section 206C were not covered for issue of certificate u/s. 197 | 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 the section 206C to bring sub-section (1H) of section 206C in its ambit. The amendments will take effect from the 1st day of October, 2024 |
| 194-IA(1) | TDS on sale of immovable property | Sub-section (1) of the said section provides that any person responsible for paying to a resident any sum by way of consideration for 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 per cent. of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon. Sub-section (2) of the said section 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. | Currently, 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 exceeds Rs. 50 lakh.
It is proposed to amend sub-section (2) of section 194-IA of the Act 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. The amendments will take effect from the 1st day of October, 2024 |
| 206C(1F) | Collection of TCS | Sub-section (1F) provides that every person, being a seller, who receives any amount as consideration for sale of a motor vehicle of the value exceeding ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer, a sum equal to one per cent. of the sale consideration as income-tax. | 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. |
| 194T | TDS on payment of salary, remuneration, interest, bonus or commission by partnership firm to partners | No such provision earlier | 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 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. Applicable TDS rate will be 10%.
The provisions of section 194T of the Act will take effect from the 1st day of April, 2025. |
| 206(7) | Interest on late payment of TCS | No different rate of interest for late deposit of TCS unlike Section 201(1A) | 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 Government account, is to be increased from one per cent. to one and one-half per cent. 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. The amendment will take effect from the 1st day of April, 2025. |
| 192(2B) | Ease in claiming credit for TCS collected/TDS deducted by salaried employees | 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. |
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. |
| 194F | TDS on payments on repurchase of units by mutual fund or UTI | TDS to be deducted @ 20% | 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%.
The amendment will take effect from 1st day of October 2024. |
| 194O | Payment of certain sums by e-commerce operator to e-commerce participant | Section 194-O of the Act provides that notwithstanding anything to the contrary contained in any of the provisions of Chapter XVII-B, where 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 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. | Reduction of the TDS rate under section 194-O from 1% to 0.1% is proposed.
The amendment will take effect from 1st day of October 2024. |
| 194M | Payment of certain sums by certain individuals or Hindu undivided family | 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. | It is proposed that TDS under section 194M of the Act be reduced from 5% to 2%.
The amendment will take effect from 1st day of October 2024. |
| 194-IB | Payment of rent by certain individuals or HUF | As per provisions of section 194-IB, 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. | It is proposed that TDS under section 194-IB of the Act be reduced from 5% to 2%.
The amendment will take effect from 1st day of October 2024. |
| 194H | Payment of commission or brokerage | As per provisions of section 194H, 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%. | It is proposed that TDS under section 194H of the Act be reduced from 5% to 2%.
The amendment will take effect from 1st day of October 2024. |
| 194G | Commission etc. on sale of lottery tickets | As per provisions of section 194G, 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%. | It is proposed that TDS under section 194G of the Act be reduced from 5% to 2%.
The amendment will take effect from 1st day of October 2024. |
| 194DA | Payment in respect of life insurance policy | As per provisions of section 194DA, 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. | It is proposed that TDS under section 194DA of the Act be reduced from 5% to 2%.
The amendment will take effect from 1st day of October 2024. |
| 194D | Payment of insurance commission | As per provisions of section 194D, 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 at present 5% (in case of person other than company). | It is proposed that TDS under section 194D of the Act (in case of person other than company) be reduced from 5% to 2%.
The amendment will take effect from 1st day of April 2025. |
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