• Honourable CM Nirmala Sitharaman as a stimulus to 20 lakh crore economic package , has announced on 14th may 2020 reduction in rates of tax deduction at source (TDS) and tax collected at source.
• TDS rates other than salary has been reduced by 25% of specified period for remaining period of f.y. 2020-21.
• Apart from the below mentioned list of sections , all other TDS and TCS sections will attract original rates .

 
The CBDT vide Press Release dated May 13, 2020, issued a revised rate 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 May 14, 2020, to March 31, 2021.

S.No.	Section of the Income-Tax Act	Nature of Payment	Existing Rate of TDS	Reduced rate from 14/05/20 to 31/03/21
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)	0.75% (individual/ HUF
5.	194D	Insurance Commission	5%	3.75%
6.	194DA	Payment in respect of life insurance policy	5%	3.75%
7.	194EE	Payments of deposits under National Savings Scheme	10%	7.5%
8.	194F	Payments on account of repurchase 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) and 30% (Others)	18.75% (Individual/HUF) and 22.5% others.
22.	194M	Payment to commission, brokerage etc. by Individual and HUF	5%	7.5%
23.	194O	TDS on e-commerce participants	N.A.	N.A.

 

Therefore, TDS on the amount paid or credited during the period from May 14, 2020, to March 31, 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 May 14, 2020, to March 31, 2021, shall be collected at the reduced rates specified in the table in para 2 above.

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%.

IMPACT ON TAX LIABILITY:

• With a view to minimise the burden on taxpayers and to increase liquidity in the hands of taxpayers , TDS rates have been reduced by CBDT.This initiative has been taken so as to overcome the situation of pandemic named COVID -19.
• It will be beneficial for both the deductor and deductee as they will have more cash flow which in result is helpful in stabilizing economy.
• Taxpayers shall have to self-assess their final tax liability after taking into consideration, income from all sources and thereafter reducing any TDS or advance tax already paid. Thus, lower TDS rates may simply mean that individuals shall be left with more disposable income to consume during the financial year.
• Further, in cases where due to losses or lower profit margins, total amount deducted as TDS is more than actual tax liability, lower rates of TDS would result in lesser amount being locked in tax refunds claimed.
• However, in cases where actual tax liability is more than TDS deducted on revenues, reduction in rates of TDS may eventually result in requirement to pay higher amount as advance tax/ self-assessment tax later.

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