To minimise the burden of the taxpayers and increase liquidity in hands of recipients, a press release has been released by the CBDT to reduce the TDS ( Tax Deduction at Source) & TCS ( Tax Collection at Source) rates. The TCS and TDS Rate for Fy 2020-21 is reduced by 25% for the non-salaried defined payments made to residents for the period of 14th May, 2020 to March 31st, 2021.
The Hon’ble Finance Minister Nirmala Sitharaman has announced the reduction in the rates of TDS & TCS as a part of the stimulus of 20 Lakh crore economic package amidst the lockdown situation in India.
The rates of TDS & TCS have been reduced by following the relief measures under the Atma Nirbhar Bharat Abhiyan announced to face pandemic COVID-19. To provide more liquidity for the business enterprises and individuals this initiative has been taken to overcome the adverse situation of the covid-19 pandemic.
Due to the nationwide lockdown for Covid-19 pandemic, liquidity flow and the business activities were jeopardized.
In this inconvenient situation, taxpayers are worried with the huge penalties and due tax payments. Thus, the tax rates associated with the TDS & TCS for this financial year have been reduced to provide some relief to the individual taxpayers.
It will be beneficial for both the deductor and the deductee in order to restore the cash flow and stabilize the economic condition in India.
As per the guidelines of the press release, here's the details of the reduced tax rates of Tax Deduction Source (TDS) & Tax Collection Source (TCS) on non-salaried payments:
TDS levied on bank's fixed deposit interest will be deducted at the rate of 7.5% instead of earlier rate of 10%.
Alongside, the rent crossing the amount of Rs 50,000/month TDS will be charged at the rate of 3.75% reduced from the earlier rate of 5%. In case any delay in tax deduction or short- Deduction the rate of 1% is levied on the fixed chargeable amount.
1. New TDS rate for Fy 2020-21
Transactions entered on or after May 14th 2020 will be subjected to the TDS & TCS at reduced rates for financial year 2020-21.
| Sl. No |
Type of Payment |
Income Tax Section |
Early TDS rate (Till May 13, 2020) |
Reduced TDS rate (From May 14, 2020 to March 31, 2021) |
| 1 |
Interest levied on securities |
Section 193 |
10% |
7.5% |
| 2 |
Dividends accumulated from mutual fund investments, shares. |
Section (194) |
10% |
7.5% |
| 3 |
Interest received apart from the security i.e Interest on Fixed deposit |
Section(194A) |
10% |
7.5% |
| 4 |
Commission based on Insurance |
Section(194D) |
5% |
3.75% |
| 5 |
Payment accumulated from Life insurance policy |
Section(194DA) |
5% |
3.75% |
| 6 |
Payments associated with repurchase of units by the UTI & Mutual funds |
Section(194F) |
20% |
15% |
| 7 |
Commission based on Lotteries, prizes on games |
Section(194G) |
5% |
3.75% |
| 8 |
Brokerage or commission |
Section(194H) |
5% |
3.75% |
| 9 |
Payment levied on Sub-contractor & contractor |
Section(194C) |
1% – for payments made to Individual/HUF2% – For payment made to others |
0.75% for payments made to Individual/HUF1.5% – for others |
| 10 |
Payment for purchase of immovable property |
Section(194-IA) |
1% |
0.75% |
| 11 |
Payment levied on rent of immovable propoerty by Individual or HUF(Crossing Rs50,000/month) |
Section(194-IB) |
5% |
3.75% |
| 12 |
Fees paid to Professional & Technical Service (FTS),Royalties etc. |
Section(194J) |
2% for certain royalties, , FTS, Call centre etc.
10% for Others |
1.5% for certain royalties FTS, Call centre etc.
7.5% for Others |
| 13 |
Payment of dividend by Mutual Funds |
194K |
10% |
7.5% |
| 14 |
Payment based on the deposit under national saving scheme |
Section(194EE) |
10% |
7.5% |
| 15 |
Payment of Income by Business Trust |
Section 194LBA(1) |
10% |
7.5% |
| 16 |
Payment of Income by Investment Funds |
194LBB(1) |
10% |
7.5% |
| 17 |
Income by securitisation trust |
194LBC(1) |
25%- for payment made to Individuals/HUF30%- For payment made to others |
18.75%- for payment made to Individuals/HUF22.5%- For payment made to others |
| 18 |
Joint Development Agreements Payment |
Section(194-IC) |
10% |
7.5% |
| 19 |
Compensation payment on acquisition of immovable property |
Section(194LA) |
10% |
7.5% |
| 20 |
Rent for immovable property |
Section194-I(b) |
10% |
7.5% |
| 21 |
Rent for Plant & Machinery |
Section194-I(a) |
2% |
1.5% |
| 22 |
Payment to commission, brokerage etc. by Individuals or HUF |
194M |
5% |
3.75% |
| 23 |
Cash withdrawal over Rs 20Lakh or more than 1crore |
Section(194N) |
2% |
2% (NO REDUCTION) |
| 24 |
TDS levied on e-commerce participants |
Section(194-O) |
1%(w.e.f. 01.10.2020) |
0.75% |
2. TCS reduced rates for Fy 2020-21
As per the press release, the TCS rates will be reduced by 25% on the items such as sales of scrap materials, timbers, tendu leaves, forest products and on mineral resources- coal, ignite etc.
| Sl. No |
Income Tax Act Section |
Type of Payment |
Early TCS Rate (May 13th, 2020) |
Reduced TCS Rate (May 14th, 2020) |
| 1 |
Section 206C(1) |
On the basis of sales- |
|
|
|
|
Timber Supply |
2.5% |
1.875% |
|
|
Tendu Leaves |
5% |
3.75% |
|
|
Scrap materials |
1% |
0.75% |
|
|
Any other Forest products not being Timber/Tendu Leaves |
2.5% |
1.875% |
|
|
Mineral being Coal, Lignite or Iron Ore |
1% |
0.75% |
| 2 |
Section 206C(1C) |
Grant on the leases, license etc - Parking space |
2% |
1.5% |
|
|
Toll plaza |
2% |
1.5% |
|
|
Mining & Quarrying |
2% |
1.5% |
| 3 |
Section 206C(1F) |
Sales of Motor vehicles over Rs. 10 Lakh |
1% |
0.75% |
| 4 |
Section 206C(1H) |
Sales of other goods |
1% (w.e.f. 1st October, 2020) |
0.75% |
3. No reduction of TDS & TCS rates non-furnishing PAN Card or Adhar Card for financial year 2020-21
As per the directives, no reduction of TDS & TCS rates, where tax is deductible at a higher rates or same rate because of non-furnishing PAN Card or Adhar Card.
As per section 206AA of the Income Tax Act, if any person fails to furnish its PAN or Aadhar Number then TDS on its payment will be deducted at the rate of 20% or applicable TDS rate, whichever is high.
Therefore, even after issuance of a press release, in case of non-furnishing of PAN, TDS will be deducted at the rate of 20% not at the reduced rate of 15%.
4. Interest, Penalties & Execution For Non-payment In Compliance With TDS & TCS
4.1 Reduce rate of Interest for non deduction or non deposit of TDS during 20th March 2020 to 29th June 2020
- Non Deduction of TDS: For non-deduction of TDS, interest @ 1% per month will be charged for the period starting from the date on which tax was deductible till the date tax is actually deducted.
- Falta de depósito de TDS: Por la falta de depósito de TDS a tiempo, se cobrarán intereses del 1,5% mensual desde la fecha de retención del TDS hasta la fecha de pago del mismo. Cualquier fracción de mes se computará como un mes completo.
La tasa de interés del 1,5% se redujo al 0,75% para las fechas de vencimiento comprendidas entre el 20 de marzo de 2020 y el 29 de junio de 2020. Sin embargo, si la suma permanece impaga después del 30 de junio, se cobrarán intereses del 1,5%.
4.2 Sin penalización por retraso en la presentación de la declaración de TDS para el período del 20 de marzo de 2020 al 30 de junio de 2020
Según la sección 234E, se cobra una penalización de 200 rupias por día por retraso en la presentación de la declaración de TDS. Sin embargo, todas las disposiciones de penalización fueron suspendidas para el período del 20 de marzo de 2020 al 30 de junio de 2020. Por lo tanto, no se cobrará recargo por mora para el cuarto trimestre del año fiscal 2019-20 si la declaración de TDS se presenta antes del 30 de junio de 2020.
