Effective from 1st October 2024, Tax Deducted at Source (TDS) rates have been reduced. These are part of the government’s ongoing efforts to simplify tax compliance and minimize the financial impact.
New TDS Rates: A Closer Look
From 1st October 2024, the TDS rates for certain sections have been reduced, making it easier for taxpayers to fulfil their obligations. Here is a summary of these are as below:
1. Reduction of TDS Rate to 2% (from 5%)
The TDS rate has been reduced to 2% under the following sections:
- Section 194DA: Pertains to deduction (including bonus) related to certain life insurance policies. This will ease the tax burden on policyholders receiving payouts.
- Section 194G: Relates to commissions on the sale of lottery tickets. The lowered rate will benefit agents and distributors in the lottery industry.
- Section 194H: Covers payments of commission or brokerage. This reduction is particularly beneficial for small brokers and agents, helping them retain a larger portion of their earnings.
- Section 194IB: Applies to rent payments made by certain individuals or Hindu Undivided Families (HUFs). This change will benefit the recipients of rent.
- Section 194M: Involves payments by certain individuals or HUFs for contracts, commissions, etc. The lowered rate will provide relief to the recipients from non-business individuals who have to deduct tax on such payments.
2. Reduction of TDS Rate to 0.1% (from 1%)
- Section 194O: Applies to payments made by e-commerce operators to e-commerce participants. This reduction from 1% to 0.1% is a substantial relief for online sellers, particularly smaller ones, it will encourage e-commerce growth.
Implications of the Reduced TDS Rates
These changes are poised to have a positive impact across various sectors:
- For Individuals and Small Businesses: The lowered TDS rates mean improved cash flow and less capital tied up in tax deductions.
- For E-commerce Participants: The reduction in TDS for payments by e-commerce operators to participants encourage a more favourable environment for online transactions, for the growth of digital commerce in India.
For the Broader Economy: By reducing the TDS rates, the government aims to stimulate economic activity, ensuring that more funds are available for reinvestment and expenditure, thereby supporting growth across various sectors.