The Finance Minister Nirmala Sitharaman made an important tax-related announcement in a press conference yesterday. To give more cash in the hands of taxpayers, she disclosed a rate cut of 25% on Tax Collected at Source (TCS) for specified receipts and Tax Deducted at Source (TDS) for non-salaried specified payments made to residents.

Key Points

1. This provision is not applicable to salaried person (Salaried person pay tax as per slab rate)

2. Applicable from 14th may 2020 and up to 31st march 2021.

3. Every TDS rate reduced by 25% excluding Winning from lottery and horse race (sec 194b/bb)

Example- Interest rate -10% (before 14th may)

Interest rate -7.5% (After 14th may)

4. The rate cuts will benefit the professionals, self-employed, and senior citizens who earn interest income and rental income.

5. No Reduction in rate of TDS where the tax is required to be deducted at higher rate due to non furnishing of PAN.

Examplethe tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN.

6. Rate of TDS and TCS not change for Non- Residence of india.

Chart of TDS Rate changes wef 14.05.2020 for financial year 2020-21

S.no. Section Nature of payment Thres hold Limit Till  13/05/ 2020 From  14/05 /2020 to 31/05/ 2020 If no pan/ Aadhaar or in valid pan
Rs. TDS Rate (%) TDS Rate (%)
1 192 Salaries Normal slab rate Normal slab rate
2 192A Premature withdrawal from EPF 50000 10 10 30
3 193 Interest on securities 10000 10 7.5 20
193 Interest on securities – Interest on securities for money issued by or on behalf of any local authority/ statutory corporation, listed debentures of a company (other than demat form), any other interest on securities Rs. 5000 in case of Individual 10 7.5 20
4 194 Dividends 5000 10 7.5 20
5 194A Interest (Banking co., co-operative society engaged in banking, post office) 50000 10 7.5 20
194A Interest (Any other person) 5000 10 7.5 20
6 194C Contractor-Single transaction-Individual/HUF 30000 1 0.75 20
-Others 2 1.5 20
194C Contractor – Consolidated Payment During the F.Y. 100000
– Individual/HUF 1 0.75 20
– Others 2 1.5 20
7 194D Insurance commission – Other than Company 15000 5 3.75 20
                     – Company 10 7.5 20
8 194DA Maturity of Life insurance policy 100000 5 3.75 20
9 194E Non-resident sportsmen or sports association 20 20
10 194EE NSS 2500 10 7.5 20
11 194F Repurchase units by MFs 20 15 20
12 194G Commission-Lottery 15000 5 3.75 20
13 194H Commission /Brokerage 15000 5 3.75 20
14 194I Rent of – Plant/Machinery/Equipment 240000 2 1.5 20
        – Land and Building/Furniture & Fixture 10 7.5 20
15 194IA Transfer of certain immovable property other than agriculture land 50 lakh 1 0.75 20
16 194IB Rent by Individual/ HUF 50000 per month 5 3.75 20
17 194IC Payment under Joint Development Agreements to Individual/HUF 10 7.5 20
18 194J Professional Fees 30000 10 7.5 20
194J Technical Fees (w.e.f. 01.04.2020) 30000 2 1.5 20
194J Payment to call centre operator (w.e.f. 01.06.2017) 30000 2 1.5 20
194J Director’s fees NIL 10 7.5 20
19 194K Payment of any income in respect of (a) units of a mutual fund as per section 10(23D); or (b) the units from the administrator; or (c) units from specified company (w.e.f. 01.04.2020) 5000 10 7.5 20
20 194LA Compensation on transfer of certain immovable property other than agriculture land 250000 10 7.5 20
21 194LBA Income from units of business trust
– interest received or receivable from a special purpose vehicle; or 10 7.5 20
– dividend referred to in sub-section (7) of section 115-O 10 7.5 20
194LBA Distribution of rental income to unit holders
– Other than Company 10 7.5 20
– Company 10 7.5 20
22 194LBB Income in respect of units of investment fund
– Other than Company 10 7.5 20
– Company 10 7.5 20
23 194LBC Income in respect of investment in securitization fund
                     – Individual/HUF 25 18.75 25
                     – Company 30 22.5 30
                     – Other Person 30 22.5 40
24 194M Payment to commission, brokerage etc. by Individual and HUF 5 3.75 20
25 194 O TDS on e-commerce particular 1 0.75 20

Chart of TCS rate changes wef 14.05.2020 for financial year 2020-21

S. No Section of the Income-tax Act Nature of Receipts Till 13/05/2020 From 14/05/2020 to 31/03/2021
1 206C(1) Sale of
(a) Tendu Leaves 5% 3.75%
(b)Timber obtained under a forest lease 2.50% 1.88%
(c) timber obtained by any other mode 2.50% 1.88%
(d) Any other forest produce not being timber/tendu leaves 2.50% 1.88%
(e) scrap 1% 0.75%
(f) Minerals, being coal or lignite or iron ore 1% 0.75%
2 206C(1C) Grant of license, lease, etc. of 2% 1.50%
(a) Parking lot
(b) Toll Plaza 2% 1.50%
(c) Mining and quarrying 2% 1.50%
3 206C(1F) Sale of motor vehicle above 10 lakhs 1% 0.75%
4 206C(1H) Sale of any other goods 0.10% 0.075%
(w.e.f 01.10.2020)

Note – No changes in TCS rate of Alcoholic liquor for human consumption and Indian made foreign liquor. (Applicable rate -1%)

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Company: Poonam verma & associates
Location: JODHPUR, Rajasthan, IN
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7 Comments

  1. J N SHUKLA says:

    what is tds rate on rent for the month of may-2020, since tds rate reduce on 14th May-2020,,, whether its 10% of 7.5%,, pls suggest Urgently,,

  2. GANDHI MOHAN BHARATI says:

    I really wonder as to why this unnecessary exercise in the garb of putting more money in the hands of assessee. After all full tax is to be paid and there is no reduction in Advance Tax or extension of time limit.. I feel that someone in the Government feels that they have done a great favour to the assessees

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