In order 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 specified payments to resident non-salaried assessees for the period from 14th May, 2020 to 31st March, 2021.
Similarly, for the same intention, the rates of TCS on all the cases have also been reduced by 25% from the prescribed rates.
However, there is no change in the threshold limit for any provision of TDS/TCS.
Further, where reduced rate of TDS is given in the lower TDS certificate issued u/s 197 of the Income Tax Act, 1961 then there is no 25% reduction of rates of TDS as mentioned in those certificates. In other words, the benefit of reduction is given only in the prescribed rates of TDS in the Income Tax Act or the relevant Finance Act and is not extended to the lower TDS certificates. Similar is the case for lower TCS certificates.
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%.
The rates of Tax Deduction at Source (TDS) for the following non-salaried specified payments made to residents has 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 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 centre) 10% (others) |
1.5% (FTS, certain royalties, call centre) 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 Investment fund | 10% | 7.5% |
| 21 | 194LBC(1) | Income by securitisation 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% (w.e.f 01.10.2020) |
0.075% |
This Article was authored by Tushant a passionate blogger by .
Co-founded Tax Ninja with the aim to serve knowledge digitally.
He's on a valiant quest to share his knowledge of Income Tax and GST.
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