Times have been challenging since the starting of this year as enterprises all across the country are facing liquidity crunches. Amidst this corona war like situation government brought forward one of the biggest relief package of Rs 20 lakh crore as a solution for all fiscal injuries. Under this FM Nirmala Sitaraman announced 25% temporary reduction in TDS/TCS rates for non salaried taxpayers. The decision will be effected from 14th May, 2020 till 31st March, 2020 in the current financial year.
New rates of TDS w.e.f 14th May 2020 to 31st March 2021
| Section | Nature of income |
Rates of TDS |
|
| Before reduction (in %) | After reduction (in %) | ||
| 193 | Interest on securities | 10% | 7.5% |
| 194 | Dividend | 10% | 7.5% |
| 194A | Interest other than on securities | 10% | 7.5% |
| 194C | Payment to contractors | Individual or HUF deductee – 1%
Any other case – 2 |
Individual or HUF deductee –0 .75%
Any other case – 1.50 % |
| 194D | Insurance commission | 10%- domestic company
5 %– any other case |
7.5% – domestic company
3.75% – any other case |
| 194G | Commission and other payments on sale of lottery tickets | 5% | 3.75
% |
| 194H | Commission and brokerage | 5% | 3.75% |
| 194-I | Rent | 2%- on plant and equipments
10%- on immovable property and furniture and fittings |
1.50 %- on plant and equipments
7.50% – on immovable property and furniture and fittings |
| 194-IB | Payment of rent by individual or HUF | 5% | 3.75% |
| 194-J | Royalty and fees for professional or technical services | 2%- If royalty is payable for sale , distribution or exhibition of cinematographic films.
®Involved solely in the business of operation of call centre ®Fees for technical services 10 %- Any other cases |
1.50% : If royalty is payable for sale , distribution or exhibition of cinematographic films
®Involved solely in the business of operation of call centre ®Fees for technical services 7.50 %- Any other cases |
| 194M | Payment to contractor, commission agent , broker or professional by individual or HUF | 5% | 3.75% |
| 194N | Cash withdrawal | 2% ®if cash withdrawal exceeds Rs 1 crore
®If assessee has not furnished return for last assessment years and cash withdrawal exceeds Rs1 crore 5%- If return not furnished for last 3 assessment years and cash withdrawal exceeds Rs 1 crore. |
1.50% ®if cash withdrawal exceeds Rs 1 crore
®If assessee has not furnished return for last 3 assessment years and cash withdrawal exceeds Rs1 crore 3.75%- if return not furnished for last 3 assessment years and cash withdrawal exceeds Rs 1 crore. |
New rates of TCS
| Section | Nature of income | Rates of TCS | |
| Before reduction (in %) | After reduction (in %) | ||
| 206C(1) | Alcoholic liquor for human consumption | 1% | .75% |
| Timber obtained under forest lease
Timber obtained by any other mode. Any other forest produce other than timber and tendu leaves |
2.5% | 1.875% | |
| Tendu leaves | 5% | 3.75% | |
| Minerals, being coal or ignite or iron ore | 1% | 0.75% | |
| Scrap | 1% | .75% | |
| 206C(1C) | Parking lot | 2% | 1.50% |
| Toll plaza | 2% | 1.5% | |
| Mining and quarrying | 2% | 1.5% | |
| 206C(1F) | Motor car | 1% | 0.75% |
| 206C(1G) | Overseas tour travel package | 5% | 3.75% |
| Remittance of forex under LRS of Rs 7 lakh or more in a financial year | 0.5%- in case remittance is a repayment of loan obtained for the purpose of pursuing any education
5 %– any other case |
0.375%- in case remittance is a repayment of loan obtained for the purpose of pursuing any education
3.75% – any other case |
|
| 206C(1H) | Sale of goods in excess of Rs 50 lakh | 0.10% | 0.75% |
Key points
- This step of government has resolved the major problem of cash flow with the taxpayers, hence providing them more liquidity.
- The mere reduction of TDS/TCS rate doesn’t means waivement of the tax for the assessment year. This simply means that the taxpayer has to pay the remaining amount in the form of advance tax or self assessment tax.
- This may lead to higher self assessment tax, as now taxpayer under 30% slab rate will have to pay 22.5% tax instead of 20%, if the TDS deducted earlier equals to 10% ( after amendment 7.5%).
- This will also put forward the obligation of advance tax payment in front of many taxpayers. According to income tax act, 1961, an individual is liable to pay advance tax at certain date in an assessment year, if his advance tax payable is Rs 10,000 or more. He will also be liable for interest under section 234B and 234C for defaults in payment of advance tax. As there will higher self assessment tax obligation.
- It has also saved them from massive tax penalties which they would have to pay for default in time bound compliance.
- The step will benefit the self- employed the most as for now they can focus more on their business revival rather than tax compliance.
- Though the step is loudly applauded , but there is still a hope for the extension of advance tax payment installment dates.
- The measure will provide the real cash flow of Rs 50000 crore in the economy.
- Though the reduction is slightly below the expectations but the longer time duration will perfectly ripen the results.
Conclusion
Thus this chunk of Atamnirbhar Bharat will give a kick start to the taxpayers in reviving their livings and business with the weapons of liquidity and lowered tax compliance.
