Direct-tax related measures announced by the Finance Minister

The Finance Minister, Smt. Niramla Sitharaman yesterday announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.

Following direct-tax related measures were announced today:-

  • Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source”

The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.

  • The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended from 31 July, 2020 and 31 October, 2020 to 30 November, 2020.
  • Tax audit due date will be extended from 30 September 2020 to 31 October 2020.
  • The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.
  • All pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership, LLP and Co-operatives shall be issued immediately.
  • Revised Rates of TDS:
S. No Sectionof the Incometax Act Nature of Payment Existing Rate of TDS Reduced rate from 14/05/2020 to 31/03/2021
1 193 Interest on Securities 10% 7.5%
2 194 Dividend 10% 7.5%
3 194A Interest other than interest on securities 10% 7.5%
4 194C Payment of Contractors and sub- contractors 1% (individual/ HUF)

2%(others)

0.75% (individual/HUF)

1.5%(others)

5 194D InsuranceCommission 5% 3.75%
6 194DA Payment in respect of life insurance policy 5% 3.75%
7 194EE Payments in respect of deposits under National Savings Scheme 10% 7.5%
8 194F Payments on account of re-purchase of Units by Mutual Funds or UTI 20% 15%
9 194G Commission,prizeetc., on sale of lottery tickets 5% 3.75%
10 194H Commission or brokerage 5% 3.75%
11 194-I(a) Rent for plant and machinery 2% 1.5%
12 194-I(b) Rent for immovable property 10% 7.5%
13 194-IA Payment for acquisition of immovable property 1% 0.75%
14 194-IB Payment of rent by individual or HUF 5% 3.75%
15 194-IC Payment for Joint Development Agreements 10% 7.5%
16 194J Fee for Professional or Technical Services (FTS), Royalty, etc. 2% (FTS, certain royalties, call  centre)

10% (others)

1.5% (FTS,certain royalties, call centre)

7.5%(others)

17 194K Payment of dividend by Mutual Funds 10% 7.5%
18 194LA Payment of Compensation on acquisition of immovable property 10% 7.5%
19 194LBA(1) Payment of income by Business trust 10% 7.5%
20 194LBB(i) Payment of income by Investment fund 10% 7.5%
21 194LBC(1) Income by securitisation trust 25% (Individual/ HUF)

30% (Others)

18.75% (Individual/HUF)

22.5% (Others)

22 194M Payment to commission, brokerage etc. by Individual and HUF 5% 3.75%
23 194-O TDS on e-commerce participants 1% (w.e.f. 1.10.2020) 0.75%

There shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non- furnishing of PAN/Aadhaar. For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.

  • Rate of Tax Collection at Source (TCS) for the following specified receipts has also been reduced by 25% for the period from 14th May, 2020 to 31st March, 2021:-
S. No Section of the Income- tax Act Nature of Receipts Existing Rate of TCS Reduced rate from 14/05/2020 to 31/03/2021
1 206C(1) Sale of
(a) Tendu Leaves 5% 3.75%
(b)Timber obtained under a forest lease 2.5% 1.875%
(c) timber obtained by any other mode 2.5% 1.875%
(d) Any other forest produce not being timber/tendu leaves 2.5% 1.875%
(e) scrap 1% 0.75%
(f) Minerals, being coal or lignite or iron ore 1% 0.75%
2 206C(1C) Grant of license, lease, etc. of

(a) Parking lot

2% 1.5%
(b) Toll Plaza 2% 1.5%
(c) Mining and quarrying 2% 1.5%
3 206C(1F) Sale of motor vehicle above 10 lakhs 1% 0.75%
4 206C(1H) Sale of any other goods 0.1% (w.e.f 01.10.2020) 0.075%

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