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Changes in TDS Rate in Budget 2016

In Budget 2016, FM announced an overhaul of India’s tax deducted at sources (TDS) system. Government hasreduced the rates of Tax Deducted at Source (TDS) on several deductions with a view to improve cash flow, especially of small tax payer.

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. Changes in TDS Rate in Budget 2016:

Sl. No. Section Nature of Payments Threshold Limit Rate of TDS
Existing Proposed Existing Proposed
1 192A Payment of accumulated balance of provident fund due to an employee 30,000 50,000 No Change No Change
2 194BB Winnings from a horse race 5,000 10,000 No Change No Change
3 194C Payment to contractors 75,000

Aggregate annual

limit

1,00,000

Aggregate annual

limit

No Change No Change
4 194D Insurance commission 20,000 15,000 10% (rate in force) 5%
5 194DA Payment towards a life insurance policy No Change No Change 2% 1%
6 194EE Payment towards a NSS deposit No Change No Change 20% 10%
7 194G Commission on sale of lottery tickets 1,000 15,000 10% 5%
8 194H Commission or brokerage 5,000 15,000 10% 5%
9 194LA Payment of compensation on acquisition of certain immovable property 2,00,000 2,50,000 No Change No Change

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

Section 194K (Income in respect of units) and Section 194L (Payment of compensation on Acquisition of capital asset) are proposed to be omitted with effect from 1st June, 2016

Notes:

  • Section 194LBB (Units of Investment Funds) to deducted TDS

(a) at the rate of 10% where the payee is a resident;

(b) at the rates in force, where the payee is a non-resident (not being a company) or a foreign company

w.e.f 1st June 2016 

  • Section 194LBC is proposed to be inserted where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust TDS is to be made @:

(a) 25% if the payee is an individual or a Hindu undivided family;

(b) 30% if the payee is any other person. 

  • It is proposed to amend Section 197 to include section 194LBB, 194LBC in the list of sections for which a certificate for deduction of tax at lower rate or no deduction of tax can be obtained e.f 1st June 2016 
  • It is proposed to amend the provisions of Section 197A for making the recipients of payments referred to in section 194-I (Rent) 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 e.f 1st June 2016 
  • It is proposed to amend Section 206AA so as to provide that the said section shall not apply to a nonresident, not being a company, or to a foreign company, in respect of- (a) Payment of interest on long term bond referred in section 194 LC; (b) Any other payment subject to condition as may be prescribed on w.e.f 1st June 2016. 
  • It is proposed to amend the Section 206C (TCS) to provide that the seller shall collect the tax at the rate of 1%:

(a) from the purchaser on sale of motor vehicle of the value exceeding Rs. 10 Lacs; and

(b) sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payments on which TDS is made) exceeding Rs. 2 Lacs

w.e.f 1st June 2016.

Source: Mr. Alok Patnia, founder of Taxmantra.com

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Issue of clarification on contentious TDS issues

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes 

PRESS RELEASE

New Delhi, 8th March, 2016

Subject: Issue of clarification on contentious TDS issues-regarding-.

With a view to bring about clarity in the interpretation of certain contentious issues relating to tax deduction at source (TDS) on payments made by television channels, broadcasters and newspapers, Central Board of Direct Taxes has issued two Circulars.

Circular No.4/2016 dated 29.02.2016 deals with TDS on payments by broadcasters or television channels to production houses for production of content or programme for telecasting. It has been clarified in the Circular that in a situation where the content/programme is produced as per the specifications provided by the broadcaster/ telecaster and the copyright of the content/ programme also gets transferred to the telecaster/ broadcaster, such contract is covered by the definition of the term ‘work’ in section 194C of the Income-tax Act and, therefore, subject to TDS under section 194C at 2%, rather than at a rate of 10% under section 194J as payment for ‘professional or technical services’.

Circular No.5/2016 dated 29.02.2016 deals with TDS on payments by television channels and publishing houses to advertisement companies for procuring or canvassing for advertisements. It has been clarified through the Circular that no TDS is attracted on payments made by television channels/ newspaper companies to the advertising agency for booking or procuring of or canvassing for advertisements. This clarification puts at rest the litigious issue as to whether such payments/ discounts are in the nature of ‘commission’ and so, subject to TDS at the rate of 10% under section 194H.

Both the Circulars are available on the website of the Department www.incometaxindia.gov.in.

(Shefali Shah)

Pr. Commissioner of Income Tax

(Media and Technical Policy)

and Official Spokesperson, CBDT

Source: Income Tax

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Non-enforcement of recovery of demand against the assessee where tax has been deducted but not deposited by the deductor

CBDT has issued a press release regarding non-enforcement of recovery of demand against the assessee where tax has been deducted but not deposited by the deductor.

The issued press release has been given below:

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes 

PRESS RELEASE

New Delhi, 11th March, 2016

Subject: – Non-enforcement of recovery of demand against the assessee where tax has been deducted but not deposited by the deductor – regarding

The Central Board of Direct Taxes had issued directions to the field offices that taxpayers whose tax has been deducted at source but not deposited to the Government’s account by the deductor, will not be asked to pay the demand to the extent tax has been deducted from his income. A letter to this effect was issued on 01.06.2015. Through this letter an embargo had been put on direct demand against the assessees in cases where the tax demand is on account of tax-credit mismatch due to non-payment of TDS to the Government account by the deductor.

Instances have come to the notice of the Board that these directions are not being strictly followed in field offices. An Office Memorandum has therefore been issued on 11.03.2015 reiterating the contents of the letter. It has been re­emphasized that the assessing officers shall not enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor.

The Office Memorandum dated 11.03.2016 is available on the website of the Department  www.incometaxindia.gov.in

(Shefali Shah)

Pr. Commissioner of Income Tax

(Media and Technical Policy)

and Official Spokesperson, CBDT

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Budget 2016: NRIs without PAN not to be subjected to higher rate of TDS

Finance Minister Arun Jaitley in his Budget 2016 speech said that Non-resident Indians (NRIs) without PAN will not be subjected to higher rate of TDS. “Non-residents without PAN are currently subjected to a higher rate of TDS. Budget 2016 proposes to amend section 206AA of the Income-tax Act so as to provide that TDS shall not be deducted at a higher rate in case of non-residents not having PAN, subject to prescribed condition,” said FM Arun Jaitley.

“It is proposed to amend the relevant provision to provide that on furnishing of alternative documents, the higher rate will not apply,” the Budget says.

FM Jaitley in his Budget speech outlined the nine pillars on the basis of which he hopes to enhance India’s economic growth. From focus on agriculture to tax and financial sector reforms, here are the nine pillars that Jaitley spoke of to transform India:

1) Agriculture and farmer welfare with an aim to double farmers’ income in the next five years

2) Rural sector

3) Social sector including healthcare

4) Educational skills and job creation to make India a knowledge based and productive economy

5) Infrastructure investment to enhance quality of life

6) Financial sector reforms

7) Governance reforms and ease of doing business

8) Prudent management of government finances

9) Tax reforms to reduce compliance burden

Jaitley said that Indian economy is resilient amidst the current global economic turmoil. “Global economy is in a serious crisis. Financial markets have been battered but Indian economy has held its ground firmly.”

“IMF has hailed India as a bright spot. Let us look at our achievements compared to the last three years of the last government. We inherited an economy with low growth and high inflation,” Jaitley said.

“We have bridged the trust deficit created by the previous government,” Jaitley added.

Source: The Economic Times

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