Changes in TDS rates and thresholds as applicable from the FY 25-26

Sub-section (1H) of section 206C of the Act, requires any person being a seller who receives consideration for sale of any goods of the value or aggregate of value exceeding Rs 50 lakhs in any previous year, to collect tax from the buyer at the rate of 0.1% of the sale consideration exceeding Rs 50 lakhs, subject to certain conditions.

• To facilitate ease of doing business and reduce compliance burden on the taxpayers, it is proposed that provisions of sub-section (1H) of section 206C of the Act will not be applicable from the 1st day of April 2025. This will ensure that both TDS under Sec 194Q and TCS under sub-section (1H) of section 206C was not made applicable on the same transaction.

Section 206AB of the Act, requires deduction of tax at higher rate when the deductee specified therein is a non-filer of income-tax return. Section 206CCA of the Act, requires for collection of tax at higher rate when the collectee specified therein is a non-filer of income-tax return. This is subject to other conditions specified in the two sections.

• To reduce compliance burden for the deductor /collector, it is proposed to omit section 206AB of the Act and section 206CCA of the Act.

Section 276BB of the Act provides for prosecution in case of failure to pay the tax collected at source to the credit of Central Government. The provision of the said section states that if a person fails to pay to the credit of the Central Government, the tax collected by him as required under the provisions of section 206C of the Act, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

• It is proposed to amend section 276BB of the Act to provide that the prosecution shall not be instituted against a person covered under the said section, if the payment of the tax collected at source has been made to the credit of the Central Government at any time on or before the time prescribed for filing the quarterly statement under proviso to sub-section (3) of section 206C of the Act in respect of such payment.

Section 194LBC of the ITA mandates that when a securitisation trust pays income to a resident investor for an investment in the trust, the person responsible for making the payment must deduct income tax at a rate of 25% for individuals and Hindu Undivided Families (HUF) and 30% for other entities. It is proposed to reduce the TDS rate under Section 194LBC from 25% and 30% to 10%, considering that the sector is now well-organised and regulated. This amendment will come into effect from 1 April 2025.

• This is a welcome amendment, as the earlier rates were very high.

• Any person, being an individual or a Hindu undivided family, responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct TDS as applicable.

• Any person, being a firm, responsible for paying any sum in the nature of salary, remuneration, commission, bonus or interest to a partner of the firm, shall, at the time of credit of such sum to the account of the partner (including the capital account) or at the time of payment thereof, whichever is earlier shall, deduct income-tax thereon at the rate of ten per cent.
• No deduction shall be made under sub-section (1) where such sum or the aggregate of such sums credited or paid or likely to be credited or paid to the partner of the firm does not exceed twenty thousand rupees during the financial year.