Impact on TDS / TCS in Budget Proposals for 2024-25

The 2024-25 budget proposals introduce significant changes to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) regulations, impacting various sections and compliance requirements.

Reduction and Optimization of TDS Rates

Effective October 1, 2024:
  • Section 194DA: TDS on payments related to life insurance policies reduced from 5% to 2%.
  • Section 194G: TDS on commissions for the sale of lottery tickets reduced from 5% to 2%.
  • Section 194H: TDS on commission/brokerage payments reduced from 5% to 2%.
  • Section 194IB: TDS on rent payments by certain individuals/HUF reduced from 5% to 2%.
  • Section 194M: TDS on payments by certain individuals/HUF for contracts, commissions, etc., reduced from 5% to 2%.
Effective October 1, 2024:
  • Section 194O: TDS on payments by e-commerce operators to participants reduced from 1% to 0.1%.
Effective April 1, 2025:
  • Section 194D: TDS on insurance commission payments reduced from 5% to 2%.
TDS / TCS

Removal of TDS on Repurchase of Units by Mutual Funds / UTI

  • Section 194F: TDS on repurchase by Mutual Funds/UTI has been removed effective October 1, 2024. TDS will remain at 20% until September 30, 2024, and will not be applicable thereafter.

Introduction of TDS on Payments to Partners

  • Section 194T: A new section introducing TDS at 10% for payments made to partners towards salary, bonus, incentives, etc., effective April 1, 2025.

Expansion of TCS on Luxury Goods

  • Section 206C(IF): The scope of TCS on the purchase of luxury goods exceeding Rs. 10 lacs is widened to include items beyond motor vehicles. This change takes effect from January 1, 2025.

Applicability of Lower TDS / TCS on Purchase of Goods

  • Section 197: The benefit of lower TDS / TCS certificates has been extended to Sections 194Q and 206C, effective October 1, 2024.

Changes in Threshold Rules for TDS on Purchase of Immovable Property

  • Section 194-1A: The threshold for TDS on the purchase of immovable property has been modified. If the property’s value is Rs. 50 lacs or more, and the value is divided among multiple buyers or sellers, TDS will now be applicable irrespective of the payment amount. This takes effect from October 1, 2024.

Limitation on Filing Correction Statements

  • Correction statements for TDS/TCS can now only be filed for the previous six years, effective April 1, 2025. During the period from April 2025 to March 2026, correction statements for FY 2019-20 onwards will be allowed.

Increase in Interest Rate for Delayed Deposit of TCS

  • The interest rate on delayed deposit of TCS is increased from 1% to 1.5% per month, effective April 1, 2025.

Consideration of TDS / TCS from Others for Employee TDS Computation

  • Employers will now consider TDS / TCS from other sources for computing TDS on employee salaries, enabling proper determination of tax liability.

Read More: Capital Gains Taxation Post-Budget: Key Changes

Amendment to Penal Provisions Related to TDS

  • Section 271H: The period for filing TDS/TCS returns without penalty is reduced from one year to one month from the due date, effective April 1, 2025.

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