Change in TDS Rate Effective from 01st October 2024

Summary: In the Union Budget 2024, the Indian government announced changes to TDS (Tax Deducted at Source) rates for various sections, effective from October 1, 2024. Key reductions include TDS on life insurance payouts (Section 194DA) dropping from 5% to 2%, and TDS on commissions and brokerage (Section 194H) also decreasing to 2%. These lowered rates increase the post-TDS income for recipients but introduce the need for taxpayers to be diligent with advance tax obligations to avoid penalties. For instance, Mr. Abhishek, a broker earning Rs. 10,00,000 from October 2024 to March 2025, will now see a reduced TDS of Rs. 20,000, leaving him with Rs. 9,80,000 post-deduction. However, he must pay an additional Rs. 32,000 in taxes plus potential interest under Sections 234B and 234C if advance tax payments aren’t met timely. The revised rates benefit taxpayers but also place them under scrutiny for advance tax compliance. Thus, ensuring advance tax payments by due dates—June 15 (15%), September 15 (45%), December 15 (75%), and March 15 (100%)—is essential for avoiding interest penalties.

TDD rate has been revised by the government in Union budget 2024. The government has revised the rate of few sections of TDS which is given below. This revised rate is already applicable from 01^st of October 2024.

Many taxpayers are very happy with this reduced tax rate especially 194H i.e. TDS on commission and brokerage that now they can have more income in their hand after deduction of TDS. They should be happy but taxpayer should also need to be more cautious because now they are under the radar of Advance Tax Payment which need to be paid on or before the due date. If any taxpayer is failed to calculate their tax liability or failed to pay the advance tax on or before the due date then they also need to pay Interest on failure of non-payment of Advance Tax.

Let’s understand with the help of an example.

Mr. Abhishek who is working as a broker for many companies earned Rs. 10,00,000.00 in a financial year 2024-25 starting from October 2024 till March 2024. He received Rs. 10 lakhs Less 2% TDS on brokerage i.e. Rs. 9,80,000.00 in total and Rs.20,000.00 as TDS Credit is received in 26AS. Earlier the amount of TDS was Rs.50,000 (5% on Commission) So, he could have received Rs. 9,50,000.00 in total after deduction of TDS of Rs. 50,000.00 and the same Rs. 50,000.00 as TDS was deposited in his name to the government by the TDS Deductor. But since the rate of TDS is reduced, Mr. Abhishek 26AS TDS credit will have only 20,000.00 in total. If we assume that Mr. Abhishek has opted new regime and there is no other income or deduction ha can claim then his to total tax liability would be Rs. 52000 (Including Cess).  Since Rs. 20,000.00 is already paid by the TDS Deductor, he needs to Pay the balance amount of Rs. 32,400.00 along with Interest for default in payment of advance tax (section 234B) @1% per month or Part and Interest for deferment of advance tax (section 234C) @1 % per month or Part.

So, Tax payer need to little more cautious and they should pay their advance tax liability on or before due date of advance tax payment to avoid interest u/s 234B and 234C. It is advisable to all the taxpayer to discharge their Advance Tax liability as per the due date as Lum sum payment of huge tax will be little more painful.

Interest will be calculated on Rs. 32,000.00 @1% per month for both 234B and 234C as per the conditions of the said section.

Due Date of payment of Advance Tax Liability for the Financial Year 2024-25.

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