Significant proposals from the Union Budget 2024 have been approved by the Finance Bill and these changes shall be effective starting October 1, 2024, including revised Tax Deducted at Source (TDS) rates.
Revised TDS Rates and Tax Changes Effective October 1, 2024
For the uninitiated, TDS is a concept that was introduced as a form of tax collection, wherein the tax is deducted at the source of income. A deductor making specific payments is required to deduct TDS and remit it to the Central Government. The deductee can claim credit for this deducted amount via Form 26AS or a TDS certificate.
Notably, as per the reports, new TDS rate changes will be implemented starting October 1, 2024:
- For those TDS transactions that fall under 19DA, 194H, 194-IB, and 194M, will be reduced from 5% to 2%.
- For e-commerce operators, the TDS rate will decrease from 1% to 0.1%.
- Under Section 194DA, applicable to life insurance payments, the rate will drop from 5% to 2%.
- Section 194G will see its TDS rate reduced from 5% to 2%. This section covers commissions on lottery ticket sales.
- For rental payments under Section 194-IB, the TDS rate will also be lowered from 5% to 2%.
- Section 194M, concerning payments by certain individuals or Hindu Undivided Families (HUFs), will have its TDS rate cut from 5% to 2%.
- The TDS rate under Section 194-O for payments by e-commerce operators will be reduced from 1% to 0.1%.
- Section 194F, which pertains to mutual fund unit repurchases, is proposed to be omitted.
New Tax Regulations from the 2024 Budget
In addition to this, the 2024 Budget introduces a 10% TDS on specific central and state government bonds, with a Rs 10,000 threshold for exemption.
Share buybacks will also incur shareholder-level taxes from October 1, and the securities transaction tax (STT) on Futures & Options will increase to 0.02% and 0.1%, respectively. Finally, Section 194-IA mandates a 1% TDS on property sales exceeding Rs 50 lakh, applicable collectively in transactions involving multiple parties. These amendments will take effect on October 1, 2024.
Summary:
Significant tax changes effective October 1, 2024, including revised Tax Deducted at Source (TDS) rates have been approved by the Union Budget 2024. Key updates include the reductions from 5% to 2% for various transactions and a decrease for e-commerce operators. In addition to this, there is a new 10% TDS applies to certain government bonds, while share buybacks and property sales will incur additional taxes.
