Changes in Tax Deducted at Source (TDS) to be effective from October 1, 2024
From October 1, 2024, Budget 2024 has significant changes to Tax Deducted at Source (TDS) will take effect, aimed at simplifying compliance and easing tax burdens for businesses and individuals. Key amendments include reductions in TDS rates across several sections. For insurance commission payments under Section 194D, the rate will drop from 5% to 2% (effective April 2025). Section 194DA will see a TDS reduction on life insurance payouts from 5% to 2%, while the TDS on lottery ticket commissions under Section 194G will also fall to 2%. Similarly, Section 194H (payment of commission or brokerage) and Section 194IB (rent payments) will both see rates decrease to 2%. Notably, Section 194F, covering TDS on the repurchase of mutual fund units, has been removed altogether. For property purchases, Section 194IA now clarifies that TDS applies if the total value exceeds ₹50 lakhs, even if split among multiple buyers or sellers. E-commerce operators under Section 194O will benefit from a reduced TDS rate of 0.1%, down from 1%. Finally, lower TDS and TCS certificates under Section 197 will now apply to purchases under Sections 194Q and 206C. These changes reflect a broader effort to ease tax compliance and improve financial operations. Below is the detailed section wise list of the amendments:
1. Section 194D: Payment on Insurance Commission (in case of person other than company)
Existing Provision: Any entity that makes the payment to the resident person, as remuneration/ rewards, by the way of commission or for soliciting or obtaining insurance business (including business relating to Continuance, renewal or revival of policies of insurance) shall deduct TDS @5% at the time of credit or payment whichever is earlier.
Amended Provision: TDS Rate in case of persons other than company will be reduced to 2% from 5% with effect from 01/04/2025.
2. Section 194DA: Payment in respect of Life Insurance Policy
Existing provision: 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 section 10(10D), shall deduct income-tax thereon at a rate of 5% on the amount of income.
Amended Provision: TDS Rate on payout has been reduced to 2% from 5% with effect from 01/10/2024.
3. Section 194F: TDS on payments on account of re-purchase of units by Mutual funds or UTI
Existing Provision: Any person responsible for paying to any person any amount referred to in sub-section (2) of section 80CCB shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent at the time of payment.
Amended Provision: This section has been removed (not applicable) with effect from 01/10/2024.
4. Section 194G: Commission on sale of Lottery Tickets
Existing Provision: Any person responsible for paying any income by way of commission, remuneration or prize (by whatever name called) on stocking, distributing, purchasing or selling lottery tickets, shall be responsible to deduct tax at source @ 5% either at the time of credit to the account of the payee or at the time of payment, whichever is earlier.
Amended Provision: The TDS Rate has been reduced to 2% with effect from 01/10/2024.
5. Section 194H: Payment of Commission/Brokerage
Existing Provision: Any person, (other than individual or a Hindu undivided family) who is responsible for paying, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, deduct tax @5%.
Amended Provision: The TDS Rate has been reduced to 2% with effect from 01/10/2024.
6. Section 194IB: TDS on Rent on property
Existing Provision: Any person, being an individual or a Hindu undivided family (not covered under section 194I), responsible for paying to a resident any income by way of rent exceeding ₹ 50,000 for a month or part of a month during the previous year, shall deduct income-tax thereon at the rate of 5%.
Amended Provision: The TDS Rate has been reduced to 2% with effect from 01/10/2024.
7. Section 194IA: TDS on purchase of immovable property (Clarification)
Existing Provision: Any person, being a transferee responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), is liable to deduct an amount equal to 1% of such sum or the stamp duty value of such property, whichever is higher if the consideration paid or payable for the transfer of immovable property is Rs. 50 lakhs or more.
Amended Provision: Now, it has been clarified that If the value of the such property is Rs. 50 lacs or more and the value is divided into more than one buyer and/or seller, TDS would now be applicable irrespective of the payment being made. This is applicable w.e.f. 1st October ’24. The consideration refers to the total aggregate consideration for the property.
8. Section 194M: Payment of certain sums by certain individuals or HUFs
Existing provision: 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, 194H or section 194J) responsible for paying any sum to any resident shall deduct TDS @ 5% at the time of payment or credit, which ever is earlier, if such sums exceeds Rs. 50 lakhs in a year.
Amended Provision: The TDS Rate on such payment has been reduced to 2% with effect from 01/10/2024.
9. Section 194O: TDS on E-commerce Operator
Existing Provision: Any person, being E-commerce operator facilitating sale of goods or provision of services of an E-commerce Participant through its digital or electronic Facility or platform (by whatever name called) shall deduct TDS @1% on the gross amount of sales or services or both either ay the time of credit or the time of payment, whichever is earlier.
Amended Provision: The TDS rate shall be reduced to 0.1% from 1% with effect from 01/10/2024.
10. Extending the scope of Applicability of lower TDS / TCS on Purchase of Goods
Certificate under Section 197 for lower TDS / TCS was not applicable for Sections 194Q (TDS on payment for purchase of goods) and 206C (TCS on receipt of sale of goods). This benefit has now been extended to both these sections. This is applicable w.e.f. 1st October’ 24.
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