Q 1. Why this post?
Ans: Economic package announcements have been made by the Finance Minister of India by addressing a press conference on May, 13th 2020 in relation to Direct taxation amongst others. Thus this post is to analyse those aspects and specially with respect to TDS provisions.
Q 2. What are the key changes announced w.r.t. Direct Tax laws ?
Ans: Following are the several relief announced:
- All pending refunds to charitable trust and non-corporate businesses and professions, partnerships, LLP and co-operative societies shall be released soon.
- The rates of TDS/TCS in respect of specified payments/receipts shall be reduced by 25%. This concession in the rate shall be available for the tax deducted or collected between 14-05-2020 till 31-03-2021. This relief shall not be available to a salaried and non-resident taxpayer.
- The last date for opting Vivad se Vishwas Scheme without paying additional 10% of the disputed tax shall be extended till December 31, 2020.
- Following due dates have been changed:
| Compliance | Existing Dates | Extended Date |
| Income-tax return (FY19-20) | July 31, 2020 and
October 31, 2020 |
November 30, 2020 |
| Tax Audit (FY19-20) | September 30, 2020 | October 31, 2020 |
| Completion of assessments | September 30, 2020 | December 31, 2020 |
| Completion of assessments | March 31, 2021 | September 30, 2021 |
Q 3. Is benefit of Reduced TDS applicable in all cases?
Ans: Reduction in rate of TDS is not available in following situations:
- Where tax is deductible from salary or provident fund under Section 192 or Section 192A respectively.
- Where the sum is paid or payable to a non-resident person.
- Where a resident person does not furnish his PAN or Aadhaar and the tax is deductible at a higher rate under Section 206AA or Section 206CC, as the case may be
- Where tax is deductible from any sum not being in the nature of payment for a contract, professional fees, interest, rent, dividend, commission, or brokerage. Thus, no concession in the rate of TDS from the sum payable in the nature of lottery income, consideration for the purchase of immovable property, etc.
Q 4. Any point which is important while availing reduced TDS Rates Benefit?
Ans: It should be noted that the relaxation in the rate of TDS/TCS will not have any impact on the ultimate tax liability of a taxpayer. Thus, any deficit in tax liability, due to reduced rate of TDS/TCS, should be payable through advance-tax instalments. Any short-fall in the deposit of advance-tax will attract interest under section 234B and 234C.
Q 5. Please give a bird eye view of TDS Rates.
Ans:
| S. No | Section of the Income-tax Act | Nature of Payment | Existing Rate of TDS | Reduced rate from 14/05/2020 to 31/03/2021 |
| 1 | 193 | Interest on Securities | 10% | 7.5% |
| 2 | 194 | Dividend | 10% | 7.5% |
| 3 | 194A | Interest other than interest on securities | 10% | 7.5% |
| 4 | 194C | Payment of Contractors and sub-contractors | 1% (individual/HUF)
2% (others) |
0.75% (individual/HUF)
1.5% (others) |
| 5 | 194D | Insurance Commission | 5% | 3.75% |
| 6 | 194DA | Payment in respect of life insurance policy | 5% | 3.75% |
| 7 | 194EE | Payments in respect of deposits under National Savings Scheme | 10% | 7.5% |
| 8 | 194F | Payments on account of re-purchase of Units by Mutual Funds or UTI | 20% | 15% |
| 9 | 194G | Commission, prize etc., on sale of lottery tickets | 5% | 3.75% |
| 10 | 194H | Commission or brokerage | 5% | 3.75% |
| 11 | 194-I(a) | Rent for plant and machinery | 2% | 1.5% |
| 12 | 194-I(b) | Rent for immovable property | 10% | 7.5% |
| 13 | 194-IA | Payment for acquisition of immovable property | 1% | 0.75% |
| 14 | 194-IB | Payment of rent by individual or HUF | 5% | 3.75% |
| 15 | 194-IC | Payment for Joint Development Agreements | 10% | 7.5% |
| 16 | 194J | Fee for Professional or Technical Services (FTS), Royalty, etc. | 2% (FTS, certain royalties, call centre)
10% (others) |
1.5% (FTS, certain royalties, call centre)
7.5% (others) |
| 17 | 194K | Payment of dividend by Mutual Funds | 10% | 7.5% |
| 18 | 194LA | Payment of Compensation on acquisition of immovable property | 10% | 7.5% |
| 19 | 194LBA(1) | Payment of income by Business trust | 10% | 7.5% |
| 20 | 194LBB(i) | Payment of income by Investment fund | 10% | 7.5% |
| 21 | 194LBC(1) | Income by securitisation trust | 25% (Individual/HUF)
30% (Others) |
18.75% (Individual/HUF)
22.5% (Others) |
| 22 | 194M | Payment to commission, brokerage etc. by Individual and HUF | 5% | 3.75% |
| 23 | 194-O | TDS on e-commerce participants | 1%
(w.e.f. 1.10.2020) |
0.75% |
TDS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table above.
It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar. For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.
6. Please give a bird eye view of TCS Rates.
Ans:
| S. No | Section of the Income-tax Act | Nature of Receipts | Existing Rate of TCS | Reduced rate 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 | 2.5% | 1.875% | ||
| (c) timber obtained by any other mode | 2.5% | 1.875% | ||
| (d) Any other forest produce not being timber/tendu leaves | 2.5% | 1.875% | ||
| (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
(a) Parking lot |
2% | 1.5% |
| (b) Toll Plaza | 2% | 1.5% | ||
| (c) Mining and quarrying | 2% | 1.5% | ||
| 3 | 206C(1F) | Sale of motor vehicle above 10 lakhs | 1% | 0.75% |
| 4 | 206C(1H) | Sale of any other goods | 0.1%
(w.e.f 01.10.2020) |
0.75% |
Tax on the amount received or debited during the period from 14th May, 2020 to 31st March, 2021 shall be collected at the reduced rates specified in the table above.
It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar. For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.
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