Following Finance Minister Nirmala Sitharaman’s announcement of a reduction in the rate of tax deducted at source (TDS) and tax collected at source (TCS) for non-salaried payments, the Central Board of Direct Taxes (CBDT) notified revised rates that will be applicable from May 14, 2020 to March 31, 2021.
Clarifying on why the TDS rate had not been reduced for the salaried class, Finance Secretary Ajay Bhushan Pandey said TDS was deducted from salary after considering various eligible deductions such as 80C of the salaried person.
This, he said, had been done to ensure that the salaried individual did not have to bear the burden of paying higher taxes at year end.
“If we reduced the TDS rate for salaried class, then their compliance burden would have increased because they would be required to pay higher taxes at the year end along with interest. Hence, TDS rate has not been cut for them,” he said. He further said that cash withdrawal of above ₹1 crore from banks would continue to attract 1% TDS and such a transaction would not enjoy the benefit of reduced TDS rate.
Foreign remittances
Similarly, there had been no cut in the TDS rate for foreign remittances as well as where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.
Speaking to reporters, Mr. Pandey said there were 23 such items in which there was a reduction in TDS rate and seven items with lower TCS. He said a 10% TDS was levied on interest on securities, interest on bank account, dividend payments, which has now been reduced to 7.5%.
“This is done to ensure businesses have liquidity,” he said. In the notification, the CBDT said while TCS on sale of motor vehicles above ₹10 lakh has been cut to 0.75% from the 1% earlier, TDS on 23 items has been reduced.
The CBDT said TDS on payment for life insurance policy has been reduced to 3.75% from the 5% earlier, while that on dividend and interest as well as rent for immovable property has been cut to 7.5% from 10%.
The 1% TDS on payment made for the acquisition of immovable property has now been reduced to 0.75%. Payment of rent by individual or HUF has been cut to 3.75% from 5%.
TDS on e-commerce participants has also been reduced to 0.75% from 1%. Similarly, tax on professional fee has been reduced to 1.5% from 2%. TDS on payments in respect of deposits under National Savings Scheme has been reduced to 7.5% from 10% and that on payments for re-purchase of units by mutual funds to 15% from 20%. The same on insurance commission and brokerage have been cut to 3.75% from 5% . TDS on payment of dividend by mutual funds has been reduced to 7.5% from 10%. TCS on sale of tendu leaves, scrap, timber, forest produce, and minerals such as coal, lignite or iron ore has also been reduced.
Published - May 14, 2020 11:28 pm IST
