TDS Rate Changes Effective October 1, 2024

TDS rate changes, you need to know if you handle taxation in India, the upcoming (Tax Deducted at Source rates) and provisions are crucial for your financial planning.

Here’s a detailed breakdown of the key updates and their impact:

Section 194DA – TDS Rate Changes on Life Insurance Policy Payouts

1. Nature of Payment: Maturity proceeds or bonuses from life insurance policies.
2. Previous TDS Rate: 5%
3. New TDS Rate: 2%
4. Threshold Limit: TDS applies only if the proceeds exceed ₹1,00,000.  

Example: If an individual receives ₹2,50,000 from a policy, TDS will now be ₹5,000 (2% of ₹2,50,000), instead of ₹12,500 (5%).

Section 194A – TDS Rate Changes on Interest from Mutual Funds and Unit Trust of India

1. Nature of Payment: Interest on securities like units of the Unit Trust of India and mutual funds.
2. New Change: Abolished
3. Threshold Limit: Not applicable anymore.

Example: Earlier, if you earned interest from UTI or mutual funds, TDS was deducted. Now, no TDS will be deducted on such earnings.

Section 194G – TDS on Lottery Commissions

   – Nature of Payment: Commission from lottery sales.

   – Previous TDS Rate: 5%.

   – New TDS Rate: 2%.

   – Threshold Limit: Commission exceeding ₹15,000.  

Example: If a lottery seller earns ₹30,000 in commission, TDS will be ₹600 (2%) instead of ₹1,500 (5%).

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Section 194H – TDS on Commission or Brokerage

   – Nature of Payment: Payment for commission or brokerage.

   – Previous TDS Rate: 5%.

   – New TDS Rate: 2%.

   – Threshold Limit: Payments exceeding ₹15,000.  

Example: A broker earning ₹50,000 in commission will now face a TDS deduction of ₹1,000 (2%) compared to the previous ₹2,500 (5%).

Section 194IB – TDS on Rent

   – Nature of Payment: Rent payments for residential or commercial properties.

   – Previous TDS Rate: 5%.

   – New TDS Rate: 2%.

   – Threshold Limit: Rent payments exceeding ₹50,000 per month.  

   Example: If rent is ₹60,000/month, the TDS will now be ₹1,200 (2%) instead of ₹3,000 (5%).

Section 194M – TDS on Payments for Specific Contracts

   – Nature of Payment: Payments to contractors or professionals by individuals or HUFs.

   – Previous TDS Rate: 5%.

   – New TDS Rate: 2%.

   – Threshold Limit: Payments exceeding ₹50,00,000 annually.  

Example: A contractor receiving ₹1 crore will have TDS deducted at ₹2,00,000 (2%) instead of ₹5,00,000 (5%).

Section 194O – TDS by E-Commerce Operators

   – Nature of Payment: Payments to sellers on e-commerce platforms.

   – Previous TDS Rate: 1%.

   – New TDS Rate: 0.1%.

   – Threshold Limit: Payments exceeding ₹5,00,000 annually.  

 Example: A seller earning ₹10,00,000 from an e-commerce platform will face TDS of ₹1,000 (0.1%) compared to the earlier ₹10,000 (1%).

TDS on Property Transactions

   – Nature of Payment: TDS on the purchase of immovable property.

   – New Rule: Now, all buyers must deduct TDS on property purchases over ₹50,00,000, regardless of the number of buyers involved.

Example: If two buyers jointly purchase a property worth ₹80,00,000, each will need to deduct TDS on their respective share of the payment.

 Future Amendments (Effective April 1, 2025)

Section 194D – TDS on Insurance Commissions

   – New TDS Rate: 2% (reduced from 5%).

Example: An agent receiving ₹1,00,000 in commission will now face TDS of ₹2,000 instead of ₹5,000.

Section 194T – TDS on Partnership Payments

New TDS Rate: 10%.

Example: A payment of ₹10,00,000 made by a partnership firm will attract a TDS of ₹1,00,000 at 10%.

Penalty for Non-PAN Holders

If the deductee does not provide a valid PAN, TDS will be deducted at 20% across all sections, irrespective of the threshold or the reduced TDS rates.

Key Takeaway

Stay updated and compliant with these new provisions to avoid penalties. These changes can significantly affect how you manage your TDS deductions and tax planning moving forward.