May 18, 2020: The CBDT has shared a slew of reductions to help consumers weather the COVID-19 storm.
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To weather the COVID-19 storm, the tax department has announced a 25% deduction in tax on payment of dividend, insurance policy, rent, professional fee and on the acquisition of immovable property for a period up to March 31, 2021.
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Following the Finance Minister’s announcement of a reduction in the rate of tax deducted at source (TDS) and tax collected at source (TCS) for non-salaried payments, the Central Board of Direct Taxes (CBDT) has informed revised rates that will be applicable from May 14, 2020, to March 31, 2021.
Announcing a slew of measures to support companies and taxpayers overcome hardships caused by coronavirus lockdown, the FM stated that the reduction in TDS/TCS rate would release about Rs 50,000 crore in the hands of people.
The CBDT said that while TCS on sale of the motor vehicle above Rs 10 lakh has been cut to 0.75 per cent from 1 per cent earlier, TDS on 23 items has been reduced.
Even the TDS on payment for life insurance policy has been condensed to 3.75 per cent from 5 per cent, while that on dividend and interest as well as rent for immovable property it has been reduced to 7.5 per cent from 10 per cent earlier.
The 1 per cent TDS charged on payment made for the acquisition of immovable property has now been reduced to 0.75 per cent. Payment of rent by individual or HUF has been cut to 3.75 per cent from 5 per cent earlier.
The tax on professional fee has also been sliced down to 1.5 per cent from 2 per cent.
TDS on payments in respect of deposits under National Savings Scheme has been reduced to 7.5 per cent from 10 per cent and that on payments for re-purchase of units by Mutual Funds to 15 per cent from 20 per cent.
The same on insurance commission and brokerage have been cut to 3.75 per cent from 5 per cent.
TDS on payment of dividend by mutual funds has been reduced to 7.5 per cent from 10 per cent.
There shall be no reduction in rates of TDS or TCS where the tax is required to be deducted or collected at a higher rate due to the non-furnishing of PAN/Aadhaar.
The reduction of TDS and TCS rates on non-salaried payments by 25 per cent will increase cash flows and help increase liquidity in the economy. The beneficial rates would be available until the end of the current financial year. The longer period of reduction till March 31, 2021, balances the slightly lower rate.
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