Union Budget 2024: How Key changes in TDS rates simplify life for taxpayers

Budget has proposed to provide a standard operating procedure for TDS defaults and simplify the compounding guidelines for defaults

The Union Budget for 2024-25 has introduced significant measures streamlining tax deducted at source (TDS) and offering relief to taxpayers. A key proposal is the consolidation of the two distinct tax exemption regimes for charities into a single framework, simplifying compliance.
 

The Budget proposes a reduction in the TDS rate from 5 per cent to 2 per cent for various payments, easing the financial burden on taxpayers. The previously applicable 20 per cent TDS on the repurchase of mutual fund or UTI units has been eliminated. In a bid to further reduce compliance costs, the TDS rate for e-commerce operators has been slashed from 1 per cent to 0.1 per cent.
 

 

To enhance taxpayer convenience, the government has also proposed allowing a credit of Tax Collected at Source (TCS) against the TDS deducted on salaries. Moreover, the Budget seeks to decriminalise delays in TDS payment up to the due date of filing the TDS statement, aiming to alleviate compliance burdens for taxpayers.

 

Check out list of key changes in TDS rates

 

 

 

“In the budget certain TDS provisions are rationalised by reducing the tax rates. Amongst these, the most welcome change is in relation to TDS on payment from e-commerce operators to e-commerce participants under section 194O where TDS is reduced from 1 per cent to 0.1 per cent. With this change, TDS rate on sale of goods through e-commerce operators is at par with sale of goods in offline transactions. Similarly, at certain instances, in order to widen the tax base, new TDS provisions are introduced, or existing provisions are amended. Currently, no TDS is deducted on payment of remuneration or commission or interest to partners,” said Sandeep Shah, partner at Cignas.

 

“However, effective April 1, 2025, firms will be required to deduct 10 per cent TDS on remuneration or commission or interest to a partner at the time of payment or credit whichever is earlier if the aggregate sum is likely to exceed Rs 20,000. This may create administrative difficulty to identify whether the payment to partners is against withdrawal of capital balance/profit or against remuneration/commission/interest and any inconsistency will result into either short deduction or excess deduction of TDS. Also, if the allowable remuneration basis the taxable profit as determined under section 40b is less than the remuneration paid, the excess amount is neither allowable as expense nor taxable as income in hands of partner. However, the firm may have already deducted the TDS on such payments which will result in excess deduction of TDS” he said.