Budget 2024: 5 Key Changes in TDS Provisions
The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, introduced several important changes that will directly impact taxpayers. These changes pertain to the Tax Deduction at Source (TDS) provisions, requiring taxpayers to stay vigilant to avoid any legal complications.
TCS Credit for Salaried Employees
One significant change is that salaried employees can now claim credit for Tax Collected at Source (TCS). Section 192 of the Income Tax Act deals with the deduction of tax at source on salary income. Previously, TCS paid on other sources of income, like income from house property or interest from savings accounts, couldn’t be adjusted against TDS deducted on salary. This often resulted in locked-up funds until refunds were processed after filing income tax returns. The new amendment allows all TCS paid and TDS deducted under different sections to be considered for TDS on salary income. This change, effective from October 1, 2024, aims to provide more liquidity to salaried employees by reducing the waiting time for tax refunds.
TDS on Jointly Held Property Sales
Section 194-IA of the Income Tax Act requires buyers to deduct 1% TDS on the sale consideration of immovable property, provided the sale value or the stamp duty value exceeds ₹50 lakh. However, the existing provision was unclear when multiple buyers or sellers were involved, and the individual amounts paid or received were below ₹50 lakh, but the total exceeded this threshold. The amendment clarifies that the exemption applies only if the total sale value is less than ₹50 lakh. For joint sales or purchases, the aggregate amount paid by all buyers to all sellers will be considered. This change, effective from October 1, 2024, aims to prevent revenue loss for the government by closing this loophole.
Lower TDS on Rent Payments
As per Section 194-IB, individuals or Hindu Undivided Families (HUFs) paying rent exceeding ₹50,000 per month are required to deduct 5% TDS on the rent amount. The Budget 2024 proposes reducing this rate from 5% to 2%, effective from October 1, 2024. This reduction will ease the financial burden on tenants by lowering the amount deducted as tax.
TCS Credit for Minors
Currently, TCS collected in a minor’s name can only be claimed in the minor’s name, even if the minor’s income is clubbed with the parent’s income. The new provision allows parents to adjust the TCS credits of a minor against their own tax liability if the minor’s income is clubbed with theirs. However, the rule remains unclear when the minor’s income is nil, and further clarification from the Central Board of Direct Taxes (CBDT) is awaited. This amendment will be effective from January 1, 2025.
TDS on Payments to Partners
The Finance Bill 2024 introduces a new TDS section for payments made to partners by a partnership firm. Currently, there is no TDS deduction on salary, remuneration, interest, bonus, or commission paid to partners. The new provision mandates that if the total payments to partners exceed ₹20,000 in a financial year, a 10% TDS will be deducted by the partnership firm. This change will be effective from April 1, 2025, i.e., from the financial year 2025-26.
These changes in TDS provisions aim to streamline tax collection and reduce complexities in the tax system. Taxpayers should familiarize themselves with these updates to ensure compliance and make the most of the available benefits.