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New TDS, TCS rates from May 14 on fixed deposits, dividends and other non-salaried payments

, ET Online|
Last Updated: Jul 01, 2020, 03.56 PM IST
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Summary The new TDS rates have come into effect from May 14, 2020, and will remain effective till March 31, 2021, i.e., till the end of the FY 2020-21, the Finance Minister Nirmala Sitharaman said in her press briefing.

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TDS on fixed deposit interest paid by a bank will now be deducted at 7.5 per cent instead of 10 per cent earlier.
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To increase liquidity in the hands of an individual and battle coronavirus-induced financial distress, the government announced various relief measures on 13 May 2020. One of these was a reduction in the tax deducted at source (TDS) and tax collected at source (TCS) rates by 25 per cent on non-salaried payments. Non-salaried payments include interest earned on fixed deposits (FDs), dividend income etc (for various payments, the TDS itself kicks in at different levels).

The new TDS and TCS rates came into effect from May 14, 2020 and remain effective till March 31, 2021, i.e., till the end of the financial year 2020-21, Finance Minister Nirmala Sitharaman stated in her press briefing. From May 14, 2020 till March 31, 2021, for any non-salaried income which is subject to TDS, tax will now be deducted at the new lower rates for FY 2020-21.

Here is a look at the reduced rates of TDS and TCS on various non-salaried payments.

New TDS, TCS rates
TDS on fixed deposit interest paid by a bank will now be deducted at 7.5 per cent instead of the previous 10 per cent. Similarly, a tenant will be required to deduct the TDS on rent exceeding Rs 50,000 per month at 3.75 per cent instead of 5 per cent earlier.

Abhishek Soni, CEO and founder, Tax2win.in says, "As per the various relief measures announced by FM, reduced rates of TDS and TCS will be applicable from May 14, 2020. Thus, where the transactions are entered and payments is due till May 13, 2020, old rate of TDS and TCS will be applicable and all the transactions which will be entered on after May 14, 2020 reduced rate of TDS and TCS will be applicable."

TDS rates effective from May 14, 2020
Nature of Payment Relevant Section TDS rate effective till May 13, 2020 TDS rate effective from May 14, 2020
Receiving accumulated taxable part of PF Section 192A 10% 10%
Interest received on securities Section 193 10% 7.50%
Dividend received from Mutual funds and on company's shares Section 194 and 194K 10% 7.50%
Interest other than Interest on Securities e.g. Fixed deposit interest Section 194A 10% 7.50%
Winnings from lottery, crosswords or any sort of game Section 194B 30% 30%
Winnings from horse races Section 194BB 30% 30%
Insurance Commission received by an Individual Section 194D 5% 3.75%
Life Insurance Policies not exempt under Section 10(10D) Section 194DA 5% 3.75%
Commission or brokerage received except for Insurance Commission Section 194H 5% 3.75%
Payment made while purchasing land or property Section 194IA 1% 0.75%
Payment of rent by individual or HUF exceeding Rs. 50,000 per month Section 194IB 5% 3.75%
Payment made to professional or commission or brokerage of more than Rs 50 lakh and above 194M 5% 3.75%
Cash withdrawal exceeding Rs 20 lakh or 1 crore as the case maybe 194N 2% 2%
Payment of Professional Fees etc. 194J 2%(FTS, certain royalties,call centre) 10%(others) 1.5%(FTS, certain royalties,call centre) 7.5%(others)
Payment in respect of deposits under National Savings Scheme 194EE 10% 7.50%
Rent for plant and machinery 194- I(a) 2% 1.50%
Rent for immovable property 194-I(b) 10% 7.50%
Source: www.Tax2win.in

TCS rates effective from May 14, 2020
Nature of Receipts Section of the Income-tax Act Existing Rate of TCS Reduced rate from 14/05/2020 to 31/03/2021
Sale of Tendu Leaves 206C(1) 5.00% 3.75%
Sale of Timber obtained under a forest lease 206C(1) 2.50% 1.88%
Sale of timber obtained by any other mode 206C(1) 2.50% 1.88%
Sale of Any other forest produce not being timber/tendu leaves 206C(1) 2.50% 1.88%
Sale of scrap 206C(1) 1.00% 0.75%
Sale of Minerals, being coal or lignite or iron ore 206C(1) 1.00% 0.75%
Grant of license, lease, etc. of Parking lot 206C(1) 2.00% 1.50%
Grant of license, lease, etc. of Toll Plaza 206C(1) 2.00% 1.50%
Grant of license, lease, etc. of Mining and quarrying 206C(1) 2.00% 1.50%
Sale of motor vehicle above 10 lakhs 206C(1F) 1.00% 0.75%
Sale of any other goods 206C(1H) 0.1% (w.e.f 01.10.2020) 0.075%
Source: Finance Ministry press releae

Points to note
  • A Ministry of Finance note stated, "There shall be no reduction in rates of TDS or TCS where the tax is required to be deducted and collected at higher rates due to non-furnishing of PAN/Aadhaar. For example, if the tax is required to be deducted at 20 per cent under section 206AA if the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20 per cent and not rate of 15 per cent."
  • One should remember that these new rates are effective for only the current financial year.
  • The reduced TDS rates will lead to higher self-assessment tax later.
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