Significant Changes in TDS Rates in Budget 2016-17

Significant Changes in TDS Rates in Budget 2016-17

Under the scheme of deduction of tax at source as provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.

 

In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 3 and table 4 respectively.

 

Table 3: Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act

 

 

Present Section Heads Existing Threshold Limit (Rs.) Proposed Threshod Limit (Rs.)
192A Payment of accumulated  balance due to an employee 30,000 50,000
194BB Winnings from Horse Race 5,000 10,000
194C Payments to Contractors Aggregate  annual limit of 75,000

Aggregate annual limit of 1,00,000

194LA Payment of Compensation on acquisition of certain Immovable Property 2,00,000 2,50,000
194D Insurance commission

 

20,000 15,000
194G Commission on sale of lottery tickets 1,000 15,000
194H Commission or brokerage 5,000 15,000

 

Table-4 : Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

 

Present Section Heads Existing Rate of TDS (%) Proposed Rate of TDS (%)
 

194DA

 

Payment in respect of Life Insurance Policy

 

2%

 

1%

 

194EE

 

Payments in respect of NSS Deposits

 

20%

 

10%

 

194D

 

Insurance commission

 

Rate in force (10%)

 

5%

 

194G

 

Commission on sale of lottery tickets

 

10%

 

5%

 

194H

 

Commission or brokerage

 

10%

 

5%

 

The following provisions which are not in operation are proposed to be omitted as detailed in Table 5.

 

Table 5: Certain non-operational provisions to be omitted

 

Present Section Heads Proposal
 

194K

 

Income in respect of Units

 

To be omitted w.e.f 01.06.2016

 

194L

 

Payment of Compensation on acquisition of Capital Asset

 

To be omitted w.e.f 01.06.2016

These amendments will take effect from 1st June, 2016.

[Clause 70 to 79]

 

 

Enabling of Filing of Form 15G/15H for rental payments

 

The provision of sub-section 194-I of the Act, inter alia, provides for tax deduction at source (TDS) for payments in the nature of rent beyond a threshold limit. The existing provisions provide threshold of Rs. 1,80,000 per financial year for deduction of tax under this section. In spite of providing higher threshold for deduction tax under this section, there may be cases where the tax payable on recipient’s total income, including rental payments , will be nil. The existing provisions of section 197A of the Income-tax Act, inter alia provide that tax shall not be deducted, if the recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed Form.No. 15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. In order to reduce compliance burden in such cases, it is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194-I also eligible for filing self-declaration in Form no 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

 

This amendment will take effect from 1st June, 2016.

[Clause 84]

Author: smit shah

I am a passionate Chartered Accountant having deep interest in taxation with combination of blogging.

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