New TDS/TCS Rates FY 2024-25| All Major Changes in TDS and TCS of Budget 2024(highlighted)

There are various provisions of Tax Deduction at Source (TDS) with different thresholds and multiple rates between 0.1%, 1%, 2%, 5%, 10%, 20%, 30% and above. To improve ease of doing business and better compliance by taxpayers, the TDS rates are proposed to be reduced. However, no change would occur with respect to sections such as TDS on salary, TDS on virtual digital assets, TDS on winnings from lottery etc/ race horses, payment on transfer of immovable property and payments to non-residents, TDS rates for TDS on contracts etc.

Section 194H – Payment of Commission or Brokerage

1. Current Provisions:
   1. 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 (not being 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 or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 5%.
2. Proposed Changes:
   1. TDS under section 194H of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   1. The amendment will take effect from 1st day of October 2024.

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

1. Current Provisions:
   1. 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 thereon.
2. Proposed Changes:
   1. TDS under section 194-IB of the Act is proposed to be reduced from 5% to 2%.
3. Effective Date:
   1. The amendment will take effect from 1st day of October 2024.

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

1. Current Provisions:
   1. Section 192 of the Act provides for the deduction of tax at source on salary income. Further, sub-section (2B) of section 192 of the Act provides for consideration of income under any other head and tax, if any, deducted thereon to be taken into account for the purposes of making the deduction under sub-section (1) of the aforesaid section, subject to certain conditions.
2. Proposed Changes:
   1. It is proposed that sub-section (2B) of section 192 may be amended to expand the scope of the said sub-section to include any tax deducted or collected under the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, to be taken into account for the purposes of making the deduction under sub-section (1) of section 192.
3. Reason for Changes:
   1. Representations have been received that credit of TCS paid should be allowed while computing the amount of tax to be deducted on salary income of the employees as this will help in avoiding cash flow issues for employees. Similarly, all TDS may be taken into account for the purpose of deduction of tax from the salary income of employees. Moreover, when the TCS etc is not taken into account, the same is required to be claimed as a refund by the employee, which adds to the compliance process.
4. Effective Date:
   1. The amendments will take effect from the 1st day of October, 2024.

Excluding sums paid under section 194J from section 194C (Payments to Contractors)

Section 194C of the Act provides for TDS on payments to contractors at the rate of 1% when the payment is being made or credit is being given to an individual or HUF and 2% in other cases. Section 194J of the Act relates to TDS on fees for professional or technical services wherein the applicable TDS rates are 2% or 10% depending on the nature of payment being made.

Clause (iv) of the Explanation of section 194C defines “work” to specify which all activities would attract TDS under section 194C. However, there is no explicit exclusion of assessees who are required to deduct tax under section 194J from requirement or ability to deduct tax under section 194C of the Act. Therefore 52 some deductors are deducting tax under section 194C of the Act when in fact they should be deducting tax under section 194J of the Act.
In view of the above, it is proposed to explicitly state that any sum referred to in sub-section (1) of section 194J does not constitute “work” for the purposes of TDS under section 194C.

The amendment will take effect from 1st day of October 2024.

Time limit to file correction statement in respect of TDS/TCS statements

1. Section 200 of the Act lists the duty of the person deducting tax under the provisions of Chapter XVII-B. Sub-section (3) of this section requires that a deductor, after paying the tax deducted to the credit of the Central Government, shall prepare statements detailing the TDS deducted and furnish it within the prescribed time to the prescribed authority. The proviso to section 200 states that a person may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete, or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be specified by the authority.
2. Section 206C of the Act provides for the collection of tax at source (TCS) on the business of trading in alcoholic liquor, forest produce, scrap, etc. Proviso to sub-section (3) of section 206C of the Act requires that a person collecting tax after paying the tax collected to the credit of the Central Government, furnish statements detailing the TCS collected within the prescribed time. Sub-section (3B) of the said section requires that the person collecting tax may also deliver to the prescribed authority a correction statement for rectification of any mistake or to add, delete, or update the information furnished in the statement delivered under the proviso to sub-section (3) in such form and verified in such manner, as may be specified by the authority.
3. While there is a time limit for furnishing statements detailing the TDS/TCS, there is no time limit for furnishing correction statements. Hence, such statements may be revised multiple times indefinitely, and thus these provisions may be misused causing difficulty to deductees/collectees. Accordingly, in order to put certainty and finality on the filing process of TDS and TCS statements, it is proposed to amend section 200 and sub-section (3B) of section 206C to provide that no correction statement shall be delivered after the expiry of six years from the end of the financial year in which the statement referred to in sub-section (3) of section 200 and the statement referred to in the proviso to sub-section (3) of section 206C are respectively delivered.
4. The amendments will take effect from the 1st day of April 2025. [Clauses 67 & 70]

Penalty for failure to furnish statements

1. Section 271H of the Act inter alia relates to penalty for failure to file Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) returns/statements within the due date. Sub-section (3) of section 271H of the Act states that no penalty shall be levied if the person proves that after paying TDS/TCS along with fees and interest to the credit of the Central Government, the person has filed the TDS/TCS statement before the expiry of period of one year from the time prescribed for furnishing such statement.
2. While earlier the due date to file a belated return by the assessee was one year from the end of the assessment year, the time limit presently is 31st December of the same assessment year. Deductees/collectees face great inconvenience if the TDS/TCS statements by deductors/collectors are not furnished in time leading to mismatch in TDS/TCS during processing of income tax returns and raising of infructuous demands.
3. To ensure better compliance, it is proposed to amend sub-section (3) of section 271H to provide that no penalty shall be levied if the person proves that after paying TDS/TCS along with fees and interest to the credit of the Central Government, he has filed the TDS/TCS statement before the expiry of period of one month from the time prescribed for furnishing such statement.
4. This amendment will take effect from the 1st day of April 2025.

The proposal to reduce TDS rates across various provisions in the Budget 2024 is a commendable step towards simplifying tax compliance and enhancing ease of doing business. Lowering TDS rates can reduce the administrative burden on businesses and taxpayers, potentially fostering a more conducive environment for economic activity. However, it is important to note that critical areas like TDS on salaries, virtual digital assets, and non-resident payments remain unchanged. While this targeted approach streamlines processes for many sectors, it ensures that sensitive areas with complex tax implications continue to be monitored closely. Overall, the move strikes a balance between simplification and targeted regulation – JSPCO