Rationalization of Tax Deducted at Source (TDS) Rates and New Sections for TDS Introduced in Union Budget 2024- The Union Budget 2024 introduces significant changes to Tax Deducted at Source (TDS) rates and new TDS sections. Key updates include a reduction in TDS rates for various sections: Section 194D (insurance commission) and Section 194DA (life insurance policies) will see rates drop from 5% to 2% starting April 2025 and October 2024, respectively. Similarly, TDS rates for commission on lottery tickets under Section 194G, commission or brokerage under Section 194H, and rent under Section 194IB will also reduce to 2% effective October 2024. Section 194O’s rate for e-commerce transactions will decrease to 0.1% from October 2024. New Section 194T will introduce a 10% TDS rate on payments exceeding Rs 20,000 to firm partners from April 2025. Section 206C(1F) will amend to include TCS on luxury goods exceeding Rs 10 lakh. Finally, Section 194-IA will clarify TDS deductions on immovable property transactions with multiple parties.
1. Section 194D – Payment of Insurance Commission
Existing: As per existing provisions, any person responsible for paying a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business shall, at the time of credit of such income or at the time of payment, deduct income tax at a rate of 5%.
Proposed: TDS in the case of persons other than companies will be reduced from 5% to 2%, effective from 01.04.2025.
2. Section 194DA – Payment in Respect of Life Insurance Policy
Existing Provisions: As per section 194DA, any person responsible for paying a resident any sum under a life insurance policy shall, at the time of payment thereof, deduct income tax thereon at a rate of 5% on the amount of income comprised therein.
Proposed: TDS under section 194DA will be reduced from 5% to 2%, effective from 01.10.2024.
3. Section 194G – Commission, etc., on Sale of Lottery Tickets
Existing Provisions: As per section 194G, any person who is responsible for paying, on or after the 1st day of October, 1991, to any person who is or has been stocking, distributing, purchasing, or selling lottery tickets, any income by way of commission, remuneration, or prize (by whatever name called) on such tickets in an amount exceeding fifteen thousand rupees, shall deduct income tax thereon at a rate of 5%.
Proposed: It is proposed to reduce the TDS rate to 2%, effective from 01.10.2024.
4. Section 194H – Payment of Commission or Brokerage
Existing Provisions: As per section 194H, any person, not being an individual or a Hindu undivided family (as specified), who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (other than insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash, by the issue of a cheque or draft, or by any other mode, whichever is earlier, deduct income tax thereon at a rate of 5%.
Proposed: It is proposed to reduce the rate to 2%, effective from 01.10.2024.
5. Section 194IB – Payment of Rent by Certain Individuals or HUF
Existing: As per section 194IB, any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to 5% of such income as income tax.
Proposed: It is proposed to reduce the rate to 2%, effective from 01.10.2024.
6. Section 194O – Payment of Certain Sums by E-Commerce Operator to E-Commerce Participant
Existing Provisions: Section 194O provides that where the sale of goods or provision of services by an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of the amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier, deduct income tax at a rate of 1% of the gross amount of such sales or services or both.
Proposed: It is proposed to reduce the rate to 0.1%, effective from 01.10.2024.
7. New Section 194T
It is proposed to insert a new TDS section 194T to bring payments such as salary, remuneration, commission, bonus, and interest to any account (including capital account) of the partner of a firm under the purview of TDS for aggregate amounts exceeding Rs 20,000 in the financial year. The applicable TDS rate will be 10%, effective from 01.04.2025.
8. New Amendment in Section 206C(1F)
Existing Provisions: Section 206C(1F) provides that every person, being a seller, who receives any amount as consideration for the sale of a motor vehicle valued at more than ten lakh rupees, shall, at the time of receipt of such amount, collect from the buyer a sum equal to 1% of the sale consideration as income tax.
Proposed: It is proposed to amend sub-section (1F) of section 206C to also levy TCS on any other goods valued at more than ten lakh rupees, as may be notified by the Central Government. Such goods would be classified as luxury goods.
9. New Amendment in Provisions of Section 194-IA
Existing Provisions: Sub-section (1) of the said section provides that any person responsible for paying a resident any sum by way of consideration for the transfer of any immovable property shall, at the time of credit or payment of such sum to the resident, deduct an amount equal to 1% of such sum or the stamp duty value of such property, whichever is higher, as income tax. Sub-section (2) of the said section provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property are both less than fifty lakh rupees.
Proposed: It is proposed to amend sub-section (2) of section 194-IA to clarify that where there is more than one transferor or transferee in respect of an immovable property, the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for the transfer of such immovable property. The amendments will take effect from 01.10.2024.
That’s all for today. For queries related to the above, please email me at [email protected].
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