The Central Board of Income Tax on Wednesday announced a 25 per cent reduction in TDS (tax deducted at sources) and TCS (tax collected at source) from May 14 to March 31 with an aim to enhance liquidity in the hands of taxpayers.
This reduction in TDS will only be applicable for 23 levied payments. Similarly, for TCS, it will be applicable to four categorise rooms of the Income Tax Act.
Following the announcement by Finance Minister Nirmala Sitharaman on reducing TDS and TCS rates as part of 20 lakh crore fiscal package announced yesterday, the Finance Ministry has announced new slabs which have been reduced by 25 per cent in all categories.
So, what are the new slabs?
As per the new slabs of TDS rates, the interest on securities has been reduced from 10% to 7.50%, on dividend from 10% to 7.50%. For this category, the threshold limit for deduction of tax is Rs 5,000 in case of an individual. On interest other than interest on securities, the rate of 10% has been cut to 7.50%. For this category, the threshold limit for deduction of tax is Rs 5,000 to Rs 50,000.
On payment to contractors, the current TDS rate is 1% if deductee is an individual or HUF and 2% in any other case.
In the new slab, the rate is 0.75% if the deductee is an individual or HUF and 1.50% in any other case. The threshold limit for deduction is a single payment of Rs. 30,000 and aggregate payment of Rs 1 lakh.
What types of payments are covered in TDS deduction rate?
As per the government announcement, the reduced rate of TDS will be applied to payment for a contract, professional fees, interest, rent, dividend, commission, brokerage. The following comprehensive list will give you detailed info.
To provide more funds at the disposal of taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, rates of TDS have been reduced by 25% for following non-salaried specified payments. Here is the table of existing & new reduced rates#IndiaFightsCorona pic.twitter.com/Zg2CFijxLF
— Income Tax India (@IncomeTaxIndia) May 13, 2020
Will NRIs or salaried person be able to avail the relief?
No. This relief shall not be available to a salaried and non-resident taxpayer.
Do I need Aadhaar or PAN Card?
As per government’s latest clarification, Taxpayers who have not furnished Pan or Aadhaar numbers while filing tax returns will not get the benefit of lower rates of Tax Collection at Source (TCS) and Tax Deduction at Source (TDS).
Also, the tax is required to be deducted at a rate of 20 per cent or higher for this category of taxpayers as per the provisions of section 206 AA of the Income-tax Act.
What is the duration of this reduction in TDS and TCS?
This reduction will be applicable for the remaining part of the FY 2020-21 i.e. from Thursday (May 14) to March 31, 2021.
It is estimated that the move will release liquidity of Rs 50,000 crore in the difficult period of Covid-19 pandemic.
TCS is applicable on sale of Tendu Leaves, timber obtained under a forest lease, any other forest produce, scrap, minerals, grant of licence, lease of parking lots, mining and quarrying, sale of motor vehicles, above rates of Rs 10 lakh. The existing rates here vary from 1 to 5 per cent. This now stands reduced between 0.75-3.75 per cent.
The TDS rates vary from 1 to 25 per cent for different segments such as interest in securities, dividend, repurchase of units by mutual funds, payment for acquisition of immovable property, fee for professional or technical services or royalty, income by securitisation trust, TDS on e-commerce participants. This will now stand reduced between 0.75 and 18.75 per cent.
The necessary legislative amendments in this regard shall be proposed in due course, government sources said.