Major Changes in TDS and TCS Rates from 1st October 2024

Code of Taxation
1

EFFECT FROM OCTOBER 1ST, 2024

Section 194H – Payment of Commission or Brokerage:

  • The TDS rate on commission or brokerage paid to individuals or HUFs is proposed to be reduced from 5% to 2%.

Section 194-IB – Payment of Rent by Certain Individuals or HUF:

  • The TDS rate on rent paid to individuals or HUFs is reduced from 5% to 2%.

Section 194DA – Payment in Respect of Life Insurance Policy:

  • The TDS rate on payments under life insurance policies is proposed to be reduced from 5% to 2%.

TDS on Sale of Immovable Property:

  • The amendment clarifies that for TDS purposes under Section 194-IA, the consideration for transfer of immovable property should be calculated on an aggregate basis, even if there are multiple buyers or sellers involved.

TDS on Floating Rate Savings (Taxable) Bonds (FRSB) 2020:

  • The amendment extends the TDS provisions to cover interest payments on FRSB 2020 and other specified securities.
  • The TDS rate will be applicable on interest payments exceeding Rs. 10,000.

Section 194G – Commission, etc on Sale of Lottery Tickets:

  • The TDS rate on commission or prizes related to lottery tickets is proposed to be reduced from 5% to 2%.

Section 194M – Payment of Certain Sums by Certain Individuals or Hindu Undivided Family:

  • The TDS rate on payments made to individuals or HUFs for carrying out work or providing professional services is proposed to be reduced from 5% to 2%.

Section 194-O – Payment of Certain Sums by E-commerce Operator to E-commerce Participant:

  • The TDS rate on payments made by e-commerce operators to e-commerce participants is proposed to be reduced from 1% to 0.1%.

Section 194F – TDS on Payments on Repurchase of Units by Mutual Fund or UTI:

  • Section 194F, which requires TDS on payments made on repurchase of units by mutual funds or UTI, is proposed to be omitted.

EFFECT FROM JANUARY 1ST, 2025

TCS on Notified Goods:

  • The existing provisions of Section 206C(1F) require TCS on the sale of motor vehicles valued over Rs. 10 lakh.
  • The amendment extends this TCS requirement to other luxury goods notified by the Central Government.
  • This change will take effect from January 1, 2025.

EFFECT FROM APRIL 1ST, 2025

TDS on Payments to Partners – New Section 194T

  • A new section 194T is proposed to be inserted to require TDS on payments of salary, remuneration, interest, bonus, or commission to partners of a partnership firm.
  • The TDS rate will be 10% for aggregate payments exceeding Rs. 20,000 in a financial year.
  • This change will take effect from April 1, 2025.

Section 194D – Insurance Commission:

  • The TDS rate on insurance commission paid to individuals or Hindu Undivided Families (HUFs) is proposed to be reduced from 5% to 2%.

Other Important Changes:

Excluding Sums Paid Under Section 194J from Section 194C:

  • The amendment clarifies that payments covered under Section 194J (fees for professional or technical services) are not considered “work” for the purposes of TDS under Section 194C. This prevents double taxation in such cases.

Extending the Scope for Lower Deduction/Collection Certificate:

  • The amendment extends the eligibility for lower deduction certificates to include payments made under Section 194Q (TDS on purchase of goods) and Section 206C(1H) (TCS on sale of goods).

  • This provides relief to taxpayers facing losses and reduces the compliance burden.

Notification of Exempt Persons from TCS:

  • The amendment allows the Central Government to notify certain persons or classes of persons who are exempt from TCS under Section 206C.

  • This will benefit entities that are exempt from income tax but face difficulties due to TCS requirements.

Ease in Claiming Credit for TCS Collected/TDS Deducted by Salaried Employees:

The amendment to Section 192(2B) allows salaried employees to take into account any tax deducted or collected under Chapters XVII-B or XVII-BB (TDS or TCS) for the purpose of calculating the TDS on their salary income. This change will simplify the compliance process for employees and reduce the need for refunds.

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