New TDS rates from October 1, 2024: The Finance Bill has approved several noteworthy proposals from the Union Budget 2024, with some changes set to take effect starting from October 1, 2024. Among these changes are the revised Tax Deducted at Source (TDS) rates.
According to the Income Tax website, “The concept of TDS was introduced with an aim to collect tax from the very source of income.As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.”
New TDS Rates from October 1, 2024: List
The Finance Bill has approved the following changes to the TDS rates, which will come into effect from October 1, 2024, as per an ET report:
- The government has announced a reduction in the TDS rates for certain payments. For transactions falling under sections 19DA, 194H, 194-IB, and 194M of the Income Tax Act, the TDS rate has been lowered from 5% to 2%.
- The government has announced a decrease in the TDS rate for e-commerce operators. Previously set at 1%, the TDS rate has been lowered to 0.1%.
- TDS rate under Section 194DA, which pertains to payments made in connection with life insurance policies has been reduced. The current rate of 5% will be lowered to 2%, providing relief to policyholders. This amendment is set to come into effect from October 1, 2024
- Section 194G of the Income Tax Act, 1961 pertains to the commission or other similar payments made on the sale of lottery tickets. As per the proposed amendment, the TDS rate under Section 194G will be lowered from the current 5% to 2%.
- The proposed amendment to Section 194-IB aims to reduce the tax deduction rate for certain individuals and Hindu Undivided Families (HUFs) when making rental payments. Currently set at 5%, the rate is set to be lowered to 2%.
- Section 194M of the Income Tax Act deals with the payment of certain sums by specified individuals or Hindu Undivided Families (HUFs). As per the proposal, the TDS rate under Section 194M will be lowered from the current 5% to 2%.
- Section 194-O deals with the payment of certain sums by e-commerce operators to e-commerce participants. The amendment reduces the applicable rate from 1% to 0.1%.
- Section 194F, which pertains to payments made by Mutual Funds or the Unit Trust of India when repurchasing units, is proposed to be omitted. This amendment is set to come into effect from October 1, 2024.
The Budget 2024 has introduced several changes in the taxation of various financial instruments and transactions. One of the significant changes is the introduction of a 10% TDS on specified central and state government bonds, including floating rate bonds, effective from October 1, 2024. However, there is a threshold limit of Rs 10,000, below which no TDS will be deducted.
Another important change is the taxation of share buybacks. “As of October 1, buyback of shares will be subject to shareholder-level taxes, much like dividends.” This change will lead to a higher tax burden for investors, and the shareholder’s acquisition costs will be considered while calculating capital gains or losses.
The securities transaction tax (STT) has also been increased on Futures & Options (F&O) of securities to 0.02 percent and 0.1 percent, respectively. “This amendment is passed and to be made effective from October 1, 2024.” Additionally, income receipts from share buybacks will now be taxed in the hands of beneficiaries.
Lastly, the budget has clarified the application of Section 194-IA, which mandates a 1% TDS on payments for the sale of immovable property exceeding Rs 50 lakh. In cases involving multiple buyers or sellers, this rule will apply collectively. “The amendments will take effect from the 1st day of October, 2024.”