The Central Board of Income Tax on Wednesday (May 13) Vide circular Number 280/2020 dated 13-04-2020, ordered a 25% reduction in the rate of income tax deducted at source (TDS) and tax collection at source (TCS) from 14 May to 31 March to provide more money in the hands of taxpayers. This reduced rate of TDS will apply to the specified list of payments including dividend, payment to contractors and sub-contractors, insurance commission, brokerage, rent for machinery and immovable property and professional fee, in order to provide more funds at the disposal of the Taxpayers for dealing with the economic situation arising out of COVID-19 pandemic. The revised rates of Tax Deduction at Source (TDS) are done only for the Non-Salaried specified payments made to Residents. Concessions provided only in case of payment to a Resident Individual, HUF, Association of Persons [AOP], Body of Individuals [BOI], Domestic Company, Firm, Cooperative Society, etc. where PAN of the deductee is available. Further, the reduced rate applies to payments made between May 14, 2020, and March 31, 2021, so this will not cover payments made before 14 May 2020. The taxpayers must remember that the relief now offered by the Government does not reduce their income tax liability. The taxpayers shall eventually have to pay the tax at the applicable tax slab rates for the financial year 2020-21, depending on the income. Those who are liable for advance tax will have to make the payment every quarter. Others will have to pay when filing income tax returns.
Here is the comprehensive table of existing and new reduced rates issued by the Income Tax department.
| Sr.No | Section | Nature of payment | Existing Tax rate (From 01.04.2020 to 13.05.2020) | Revised Tax rate (From (14.05.2020 to 31.03.2020) |
| 1 | 194 A | Interest on deposits for more than Rs.40000 in a financial year. For senior citizen: Interest on deposits for more than Rs.50000 in a financial year. | 10% | 7.50% |
| 2 | 194C | Payment to Contractor/ Sub- Contractor/ Advertisement more than Rs. 30,000 per contract or aggregate amount Rs.1,00,000 in a Financial Year [These provisions are also applicable to a Transport contractor] | Individual, HUF :1% AOP/BOI/Domestic company/firm or any other persons:2% | Individual, HUF : 0.75% AOP/BOI/Domestic company/firm or any other persons:1.50% |
| 3 | 194 H | Commission or Brokerage more than Rs.15,000 during a Financial Year | 5% | 3.75% |
| 4 | 194I | Rent more than Rs.2,40,000 during a Financial Year | Plant and machinery including generator:2%Land, Building, Furniture or Fittings :10% | Plant and machinery including generator: 1.50% Land, Building, Furniture or Fittings :7.50% |
| 5 | 194-IA | Payment for transfer of Immovable Property other than Agricultural Land | 1% | 0.75% |
| 6.a | 194J | Fee for Professional [Please refer Note (ii)] or Technical Services more than Rs.30,000 in a Financial Year( For individuals,HUF, AOP,BOI domestic company or firm) | 10% | 7.50% |
| 6.b | 194J | TDS for any Remuneration or Fees or Commission (other than those on which tax is deductible under Section 192) to a director of a company(including our bank)(without any threshold limit) | 10% | 7.50% |
| 7.a | 194N | Cash Withdrawal exceeding Rs 1 Crores during the financial year up to 30-June-2020 | 2% | 2% |
| 7.b | 194N | Cash Withdrawal exceeding Rs 1 Crores during the financial year | Cash withdrawal upto Rs.20 lakhs: -> Cash withdrawal exceeding Rs.20 lakhs and up to one crore:-> Cash withdrawal exceeding Rs.one Crore-> | No TDS TDS @ 2% of amount exceeding Rs 20 Lakhs TDS @ 5% of amount exceeding Rs 1 Crs |
The reduced rates of TDS and TCS shown above are not applicable to Non-PAN deductees. So there shall be no reduction in rates of TDS or TCS for those who do not furnish PAN numbers.
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