Changes in TDS/TCS provisions with effect from 01-04-2020

In the budget 2020, the Government has introduced 3 new TDS provisions and modify certain existing provisions that are practically applicable from 01-04-2020.
In the budget, it was proposed to increase the turnover limit for Tax Audit under section 44AB of the Income Tax Act, 1961 for business assessees to Rs.5 crore from existing Rs 1 crore, subject to compliance of certain conditions.
On such amendment, the TDS deduction provisions effective on Individuals and HUF under existing some of the Sections 194A, 194C, 194H, 194I, and 194J would have got relief as they will not be liable to get their accounts audited and hence, exempted from the provisions of TDS deduction. 
To continue their deduction of tax, it has been proposed in the Finance Bill that the TDS provisions would be applicable to Individuals and HUF, whose turnover from business exceeds Rs. 1 crore or gross receipts from profession exceeds Rs. 50 lakhs.

***Changes in TDS Provisions section wise***

Section 192: TDS on Salary:-
  • TDS to be deducted on ESOP given by eligible start-ups (start-ups eligible under section 80-IAC) within 14 days :-
    • after the expiry of 48 months from the end of the relevant assessment year; or
    • from the date of the sale of such specified security or sweat equity share by the assessee; or
    • from the date of the assessee ceasing to be the employee of the person 
    • whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred by eligible start-up referred to in Section 80-IAC
Section 194: TDS on Dividends:-
  • This section is applicable where payment of the dividend is made to the resident by a body corporate.
  • Deduction of TDS is not required if such aggregated dividend distributed or paid or likely to be distributed or paid during the financial year does not exceed Rs.5000/- (per shareholder wise Rs.5000/-)
  • Tax to be deducted at source at the rate of 10%.
  • The exemption is given to the LIC, GIC and their wholly-owned subsidiaries, they shall not be liable for TDS. 
Section 194A: TDS on Interest:-
  • The scope of this section is now widened.
  • Earlier co-operative society was exempted from this section and they were not required to deduct TDS on payment of interest.
  • Now a Cooperative society shall be liable to deduct tax under this section if:-
    • the total sales, gross receipts or turnover of the cooperative society exceeds fifty crore rupees during the financial year immediately preceding the financial year in which the interest is credited or paid; and 
    • the amount of interest, or the aggregate of the amount of such interest, credited or paid, or is likely to be credited or paid, during the financial year is more than fifty thousand rupees in case of payee being a senior citizen and forty thousand rupees, in any other case. 
Section 194C: TDS on Contractors
  • Scope of this section is widened by amending the definition of 'WORK'
  • The amendment is proposed to the definition of ‘work’ defined under section 194C to provide that in a contract manufacturing the cost of the raw material used shall be included within the purview of the ‘work.’  
  • Earlier material used in work that was purchased from the customer only was covered. So people use to escape this clause by getting the contract manufacturers to procure the raw material supplied through its related parties, associates the tax is being deducted at a lower amount.
Section 194J: TDS on fees for professional or technical services:-
  • The rate of deduction of tax at source on fees paid for technical services at a concessional rate of 2% instead of 10%.
  • The TDS rate in other than technical fees (i.e Professional Service) under section 194J would remain the same at the rate of 10% and there is no change in the same.
Section 194K: TDS on Income in respect of Units
  • TDS at the rate of 10% at the time of credit of such income to the account of the payee or at the time of payment thereof by any mode, whichever is earlier by any person responsible for paying to a resident any income, is required to be deducted in respect of : 
    • units of a Mutual Fund specified under section 10(23D); or
    • units from the Administrator of the specified undertaking; or 
    • units from the specified company
Section 194O: TDS on e-Commerce transactions
  • TDS at the rate of 1% to be deducted  on the gross amount of such sales or service or both at the time of payment thereof to such participant by any mode, whichever is earlier: 
    • TDS is to be paid by e-commerce operator for the sale of goods or provision of service facilitated by it through its digital or electronic facility or platform
    • E-commerce operator is required to deduct tax at the time of credit of the amount of sale or service or both to the account of e-commerce participant; or
    • Any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant shall be deemed to be amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of income-tax. 
    • The sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator shall not be subjected to provision of this section, if the gross amount of sales or services or both of such individual or HUF, through e-commerce operator, during the previous year does not exceed Rs 5 lakhs and such e-commerce participant has furnished his PAN/Aadhaar to the e-commerce operator. 
***CHANGES IN TCS Provisions***

Clause (IG) – TCS on Liberalised Remittance Scheme (LRS) and TCS on Selling of Overseas Tour Packages:-
  • An authorized dealer receiving an amount or an aggregate of amounts of Rs 7 lakhs or more in a Financial Year for remittance out of India under the LRS of RBI, shall be liable to collect TCS if he receives a sum in excess of said amount from a buyer being a person remitting such amount out of India.
  • A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such a package, shall be liable to collect TCS at the rate of 5% and at the rate of 10% in non-PAN/ Aadhaar cases. 
  • This provision shall not apply if the buyer is liable to deduct tax at source under any other provision of the Act and he has deducted such amount, Central, State and certain other authorities are exempted. 
Clause I(H)- TCS on Sale of goods:-

  • TCS is required to be collected where sale consideration received from a buyer in a previous year in excess of  Rs 50 lakhs and seller whose gross receipts, total sales or turnover from business exceeds 10 crores during the preceding financial year.
  • A seller of goods to collect TCS at the rate of 0.1% (1% non-PAN/ Aadhaar cases). 

Procedural Changes relating to filing of TDS Returns  

  • In TDS Returns, now it will also be required to report all the payments made to persons under section 194A wherein tax has been deducted, not deducted due to submissions of declarations or deductions that are below the exemption limit provided under the Section; and 
  • Introduce online filing of an application by a person making payments to the non-resident seeking determination of tax to be deducted at source
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[Disclaimer:-This article is being furnished for informational purposes only. We make every effort to use reliable & comprehensive information, but we do not represent that the contents of the article are accurate or complete.]


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