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New reduced TDS Rate Chart for FY 2020-21 and Income Tax Relief Measures

new-reduced-tds-rate-chart-for-fy-2020-21-and-income-tax-relief-measures

New reduced TDS Rate Chart for FY 2020-21 and Income Tax Relief Measures: Finance Minister Smt. Nirmala Sitaraman held a press conference on 13.05.2020 to provide details of Rs.20 Lakh Crore special economic package announced by the Prime Minister on the day before 12.05.2020 to spur growth and revive the Indian economy amid COVID-19 pandemic.

In the press conference, the Finance Minister announced several packages for MSME sector, DISCOM sector, Real Estate sector, and many more.

She also announced several tax relief measures on Income Tax under the Direct Taxes which are outlined below-

I. Tax Relief to Business

The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.

At the beginning of April month, the government announced that the Income Tax Department will release all pending income tax refunds up to Rs 5 lakh immediately which will benefit around 14 Lakh taxpayers. Income tax refunds worth Rs. 5,204 crore have been issued to MSMEs to provide immediate liquidity during COVID-19 crisis. It was further informed that aggregate income tax refund for Rs. 4,250 crore had been issued to over 10.2 lakh taxpayers as on 14th April 2020.

This time the Finance Minister did not specify any limit of income tax refund amount. Further, there is no provision or announcement for corporate assessees related to issuance of income tax refund.

II. Tax related measures

1. Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” - The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21. This will provide liquidity to the tune of Rs 50,000 Crore.

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. 
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.

Unfortunately, no such relief is given to the salaried assessees.

It must be remembered that there is no corresponding amendment announced for non-payment of advance tax. Hence, if the reduced TDS rates is making shortfall of payment of estimated tax liability, the same needs to be filled by increasing the amount of advance tax. Though the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 has extended the due date of making the first instalment of Advance Tax from June 15, 2020 to June 30, 2020.

Further, reduction in TDS rate does not mean there is reduction in income tax rates. The payee has to pay the tax on his own if there is a reduced amount of TDS than his tax liability. Hence, this is only a postponement of tax payment and not a relief as such.

The reduced rate of TDS/TCS shall apply for both corporate and non-corporate assessees. 

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 clarified by the CBDT that the benefit of reduced rate of TDS/TCS for deduction/collection of tax at a higher rate of 20 per cent (or as specified) under section 206AA or 206CC shall not be applicable in case of non-furnishing of PAN to the deductor/seller.

In this respect, it may be noted that the rates of TDS either have been specified in the Income Tax Act, 1961 or in the Finance Act, 2020 for the AY 2021-22 (or FY 2020-21). The rates of TCS have been specified in the Income Tax Act, 1961 only.

The existing and new reduced rates of TDS/TCS effective from 14.05.2020 to 31.03.2021 is given here under-

New TDS Chart applicable from 14.05.2020 to 31.03.2021

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
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
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 of commission, brokerage etc. by Individual and HUF 
5%
3.75%
23.
194N
Cash Withdrawal
2%/
5% (w.e.f 01.07.2020)
1.50%/3.75%
24.
194-O
TDS on e-commerce participants 
1% 
(w.e.f. 1.10.2020) 
0.75%

New TCS Chart applicable from 14.05.2020 to 31.03.2021

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(1G)
Overseas Tour Package
5%
(w.e.f 01.10.2020)
3.75%
Remittance of Forex under LRS of Rs. 7 lakh or more in a financial year
(a) Where remittance is a repayment of education loan
0.5%
(w.e.f 01.10.2020)
0.375%
(b) Others
5%
3.75%
5
206C(1H) 
Sale of any other goods
0.1% 
(w.e.f 01.10.2020)
0.075%

2. The due date of all Income Tax Returns for Assessment Year 2020-21 (FY 2019-20) will be extended from 31st July, 2020 and 31st October, 2020 to 30 November, 2020.  Similarly, the tax audit due date will be extended from 30th September to 31st October 2020.

Recently, the due date of filing of Income Tax Returns and Tax Audit Report has been amended by the Finance Act, 2020 from 30th September to 31st October. Further, the due date to furnish a tax audit report is prescribed as one month prior to the due date of filing of return of income. Hence, the due date to file a tax audit report is linked with the ITR filing due date.

This will be affecting the Company assessees and those assessees who are compulsorily required to get his accounts audited under section 44AB of the Income Tax Act, 1961.

3. The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.

Recently, the government has extended the date for making the payment of disputed tax without additional 10% amount to June 30, 2020 by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

The Direct Tax Vivad se Vishwas Act, 2020 provides that the disputed tax shall be paid by 31st March 2020. It is further provided that the amount of disputed tax shall be enhanced by additional 10 per cent if the same is paid on or after April 1, 2020. Since, nation-wide lockdown to contain the spread of coronavirus was declared from 25th March, 2020, the prescribed date for payment of dispute tax under the Vivad Se Vishwas Scheme had been extended from 31st March, 2020 to June 30, 2020 by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

Since the lockdown is still continuing and all the business and offices are shut, the government has decided to extend the said date further to 31st December, 2020.

It has to be noted that the Vivad se Vishwas Scheme is introduced under an Act namely, The Direct Tax Vivad Se Vishwas Act, 2020 and hence any changes in the dates should be done by amending the Act only. Since the Parliament was not in session on 31st March, 2020 the date was changed by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020. However, in the Ordinance of 2020, there is no provision to further extend the date by any Notification as provided for other income-tax related matters.

4. The date of assessments getting barred on 30th September, 2020 will be extended to 31st December, 2020 and those getting time barred on 31st March 2021 will be extended to 30th September, 2021.

In this context, it should be remembered that the due date of completion of assessments is given in the Income Tax Act itself. Any change or modification thereof is expected to be done by amending the Act only and since the Parliament is not in session now, it is expected that another ordinance may be introduced by the government in this regard.

CBDT has issued a press note on 13.05.2020 specifying the new reduced rates of TDS and TCS effective from 14.05.2020 to 31.03.2021. From April 1, 2021, the prescribed rates of TDS shall apply.

In a tweet, the CBDT stated that “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”.



Read the full text of the CBDT Press Release

Government of India 
Ministry of Finance 
Department of Revenue 
Central Board of Direct Taxes 

New Delhi, 13th May, 2020 

PRESS RELEASE

Reduction in rate of Tax Deduction at Source (TDS) & Tax Collection at Source (TCS) 

In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, 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
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
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%

2. 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)
0.75%

3. Therefore, TDS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table in para 1 above. Similarly, the tax on the amount received or debited during the period from 14th May, 2020 to 31st March, 2021 shall be collected at the reduced rates specified in the table in para 2 above. 

4. 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%. 

5. Legislative amendments in this regard shall be proposed in due course. 

(Surabhi Ahluwalia) 
Commissioner of Income Tax 
(Media & Technical Policy) 
Official Spokesperson, CBDT





Note:

The following requires attention in regard to the table of TDS so provided in the press note:

The table of TDS chart provided in the press note does not mention the TCS under section 194N regarding TDS on Cash Withdrawal as introduced by the Finance (No. 2) Act, 2019 and as amended by the Finance Act, 2020. It appears to be missed-out since this item has not been given any exception from the reduction of rates of TDS. Whether this is a missed-out item or an excluded item from reduction can be known once a Notification is issued in this behalf. Till then, the benefit of the reduction of the rate of TDS shall not be applicable.

The following three points require attention in regard to the table of TCS so provided in the press note:

1. The table of TCS chart provided in the press note does not mention the TCS under section 206C(1) regarding TCS on Sale of Alcoholic Liquor for human consumption. It appears to be missed-out since this item has not been given any exception from the reduction of rates of TCS. Whether this is a missed-out item or an excluded item from reduction can be known once a Notification is issued in this behalf. Till then, the benefit of the reduction of the rate of TDS shall not be applicable.

2. The table of TCS chart provided in the press note does not mention the TCS under section 206C(1G) regarding TCS on Overseas Tour Package as introduced by the Finance Act, 2020. It appears to be missed-out since this item has not been given any exception from the reduction of rates of TCS. Whether this is a missed-out item or an excluded item from reduction can be known once a Notification is issued in this behalf. Till then, the benefit of the reduction of the rate of TDS shall not be applicable.

3. The new rate of TCS under section 206C(1H) on sale of any goods under serial 4. of the TCS chart is given as 0.75%. It should be 0.075%. It appears to be a typographical error.

CBDT has clarified that this is a small typographical error vide a tweet dated 14.05.2020.




Further Readings:




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