Summary of impact on TDS / TCS in Budget proposals of 2024-25

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The 2024-25 budget proposals bring significant changes to TDS and TCS regulations, impacting various sections and compliance requirements. This article summarizes the key highlights, including rate reductions, the introduction of new sections, and updates to existing provisions.

Highlights:

• Reduction / Optimization of TDS Rates under different sections
• TDS on repurchase of units by Mutual Funds / UTI removed (Section 194F – omitted)
• TDS introduced on payment to Partners towards Salary, Bonus, etc. (Section 194T – new)
• Scope of TCS on luxury goods exceeding Rs. 10 lacs widened beyond Motor Vehicles
• Scope of lower TDS / TCS (Section 197) extended on Purchase of Goods
• TDS on Purchase of Immovable Property (Section 194-1A) – threshold rules modified
• Filing of Correction Statements – now limited to the previous six years only
• For delayed deposit of TCS, interest rate has been increased to 1.5% from 1% per month
• Employers to consider TDS / TCS from others for TDS computation of employees
• Amendment in in the penal provision related to TDS – Section 271H

These are briefly explained below:

Reduction / Optimization of TDS Rates

Reduction on TDS Rate to 2% (from 5%) in following sections – w.e.f. 1^st October ‘24

• 194DA – Payment related to Life Insurance Policy
• 194G – Commission on Sale of Lottery Tickets
• 194H – Payment of Commission / Brokerage
• 194IB – Payment of Rent by certain Individuals / HUF
• 194M – Payment by certain individuals / HUF to for contracts, commission, etc.

Reduction on TDS Rate to 0.1% (from 1%) in following sections – w.e.f. 1^st October ‘24

• 194O – Payment by e-Comm operators to e-Comm participants

Reduction on TDS Rate to 2% (from 5%) in following sections – w.e.f. 1^st April ’25.

• 194D – Payment related to Insurance Commission

TDS on repurchase of units by Mutual Funds / UTI removed

Section 194F – TDS on repurchase by MF / UTI has been removed w.e.f. from 1^st October ’24. It implies that TDS would be @20% upto 30^th Sept ’24 and not applicable thereafter.

Introduction of TDS on payment to Partners towards Salary, Bonus, etc.

A new section 194T has been introduced for TDS @10% for payments made to Partners towards Salary, Bonus, Incentives, etc. This is applicable w.e.f. 1^st April ’25.

Scope of TCS on luxury goods exceeding Rs. 10 lacs widened

Currently, Section 206C(IF) provides for TCS on purchase of motor vehicles valued at Rs. 10 lacs or more. The scope has been widened to include more luxury items which may be notified in the Gazette from time to time. This is applicable w.e.f. 1^st January ’25.

Applicability of lower TDS / TCS extended on Purchase of Goods

Certificate under Section 197 for lower TDS / TCS was not applicable for Sections 194Q and 206C. This benefit has now been extended to both these sections. This is applicable w.e.f. 1^st October ‘24

Change in threshold rules – TDS on Purchase of Immovable Property (Section 194-1A)
Currently, buyer paying less than Rs. 50 lacs to purchase immovable property, TDS u/s 194-1A was not applicable. However, this has now been modified – 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. 1^st October ‘24

Correction Statements – limited to the previous six years only

As per the current provisions, one can file correction statements for any period as many times with practically no restrictions. It is now proposed that no correction statement can be filed after six years on completion of the financial year. This is applicable w.e.f. 1^st April ’25. It implies that during the period Apr’25 to Mar’26, correction statements for FY:2019-20 onwards will only be allowed.

For delayed deposit of TCS, increase in interest rates

Interest u/s 206(7) on delayed deposit of TCS is currently 1% per month of part thereof from the date of collection of tax. This rate will now be increased to 1.5% w.e.f. 1^st April ’25.

Employers to consider TDS / TCS from others for TDS computation of employees

As per the current provisions, the employees were required to declare their other income sources for the determination of the tax liability for deduction of tax (TDS) by the employer. There was no provision for declaring TDS / TCS from others to the employer. Now it is proposed to make amendments to also include these enabling proper determination of TDS on Salary.

Amendment in in the penal provision related to TDS – Section 271H

Presently, sub-section (3) of section 271H allows filing of TDS / TCS Return within one year from the due date as specified. To facilitate better compliance, it is proposed to modify this one-year period to one month. It implies that TDS / TCS return must be filed latest within one month from the date it falls due to avoid penal action. This is applicable w.e.f. 1^st April ’25.

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