TDS Rate Reduction
“Atmanirbhar Bharat Abhiyaan”, the COVID-19 relief package puts bold reforms at the heart of Hon. PM Modi’s stated plan to make India self-reliant. It is forward thinking in its essence, in that it plans to handle the current pandemic, without knowing when it might end. The stimulus package was declared in tranches by the Hon Finance Minister. The first tranche includes tax relief measures. One of this tax relief measure is a reduction of 25% of existing Tax Deduction at Source (TDS) tax rates and also Tax Collection at Sources (TCS) rates from 14th May 2020 till 31st March 2021. Reduction in TDS rate will ensure more money flowing to businesses and less money going to the Government. The Finance Minister expects to free up Rs 50,000 crores from this measure.
Below is the revised TDS rate chart as amended, applicable for FY 2020-21:
| Sr.No | Section of the Income- tax Act | Nature of Payment | Existing Rate of TDS | Reduced rate from 14/05/2020 to
31/03/2021 |
| 1 | 193 | Interest on Securities | 10% | 7.5% |
| 2 | 194 | Dividend | 10% | 7.5% |
|
3 |
194A | Interest other than interest on securities | 10% | 7.5% |
| 4 | 194C | Payment of Contractors and sub-contractors | 1% (individual/HUF) 2% (others) |
0.75%
(individual/HUF)1.5% (others) |
| 5 | 194D | Insurance Commission | 5% | 3.75% |
|
6 |
194DA | Payment in respect of life insurance policy | 5% | 3.75% |
|
7 |
194EE | Payments in respect of deposits under National Savings Scheme | 10% | 7.5% |
|
8 |
194F | Payments on account of re-purchase of Units by Mutual Funds or UTI | 20% | 15% |
|
9 |
194G | Commission, prize etc., on sale of lottery tickets | 5% | 3.75% |
| 10 | 194H | Commission or brokerage | 5% | 3.75% |
| 11 | 194-I(a) | Rent for plant and machinery | 2% | 1.5% |
| 12 | 194-I(b) | Rent for immovable property | 10% | 7.5% |
| 13 | 194-IA | Payment for acquisition of immovable property | 1% | 0.75% |
| 14 | 194-IB | Payment of rent by individual or HUF | 5% | 3.75% |
| 15 | 194-IC | Payment for Joint Development Agreements | 10% | 7.5% |
| 16 | 194J | Fee for Professional or Technical Services (FTS), Royalty, etc. | 2% (FTS, certain royalties, call center)
10% (others) |
1.5% (FTS, certain royalties, call center)
7.5% (others) |
| 17 | 194K | Payment of dividend by Mutual Funds | 10% | 7.5% |
| 18 | 194LA | Payment of Compensation on acquisition of
immovable property |
10% | 7.5% |
|
19 |
194LBA(1) | Payment of income by Business trust | 10% | 7.5% |
| 20 | 194LBB(i) | Payment of income by In- vestment fund | 10% | 7.5% |
| 21 | 194LBC(1) | Income by securitization trust | 25%
(Individual/HUF) 30% (Others) |
18.75% (Individual/HUF) 22.5% (Others) |
| 22 | 194M | Payment to commission, brokerage etc. by Individual and HUF | 5% | 3.75% |
| 23 | 194-O | TDS on e-commerce participants | 1%
(w.e.f.1.10.2020) |
0.75% |
Further, the rate of Tax Collection at Source (TCS) for the following specified receipts has also been reduced by 25% for the period from 14th May, 2020 to 31st March, 2021: –
|
S. No |
Section of the
Income-tax Act |
Nature of Receipts | Existing Rate of TCS | Reduced rate from 14/05/2020 to
31/03/2021 |
|
1 |
206C(1) | Sale of | ||
| (a) Tendu Leaves | 5% | 3.75% | ||
| (b)Timber obtained under a forest lease | 2.5% | 1.875% | ||
| (c) timber obtained by any other mode | 2.5% | 1.875% | ||
| (d) Any other forest produce not being timber/tendu leaves | 2.5% | 1.875% | ||
| (e) scrap | 1% | 0.75% | ||
| (f) Minerals, being coal or lignite or iron ore | 1% | 0.75% | ||
|
2 |
206C(1C) | Grant of license, lease, etc. of
(a) Parking lot |
2% | 1.5% |
| (b) Toll Plaza | 2% | 1.5% | ||
| (c) Mining and quarrying | 2% | 1.5% | ||
|
3 |
206C(1F) | Sale of motor vehicle above 10 lakhs | 1% | 0.75% |
|
4 |
206C(1H) | Sale of any other goods | 0.1%
(wef 01.10.2020) |
0.75% |
It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar. For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.
Kindly Note: amended rates have been given based on PIB Notification dated 13.05.2020 and on the date of publication of this post no notification in this regard is notified by the CBDT. The press release can be viewed here.