Revised tax rates and TDS changes are now in effect. Here’s what taxpayers need to know about the updates.
Several key tax changes, including revisions to the Tax Deducted at Source (TDS) framework, will take effect as outlined in the Union Budget 2024, starting today (October 1, 2024).
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These updates affect a range of transactions, from rent and insurance payouts to e-commerce and more.
What is TDS?
TDS, or Tax Deducted at Source, is a mechanism where tax is deducted at the point of payment and then remitted to the government.
The recipient of the payment can later claim credit based on Form 26AS or a TDS certificate.
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Key TDS Rate Changes from October 1, 2024
Section 194DA (Life insurance payments): The TDS rate on life insurance payouts has dropped from 5% to 2%.
Section 194G (Lottery ticket commission): TDS on commissions from lottery ticket sales is reduced from 5% to 2%.
Section 194-IB (Rent payments): Rent payments made by individuals or HUF now face a 2% TDS rate, down from the previous 5%.
Section 194M (Certain payments by individuals or HUF): A 2% TDS, reduced from 5%, now applies to payments made by individuals or HUF.
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Section 194-O (E-commerce operators): Payments by e-commerce operators to participants now incur a TDS rate of 0.1%, down from 1%.
Section 194F (Mutual fund repurchase): TDS on repurchases by mutual funds or Unit Trust of India has been omitted.
Additional tax changes from October 1, 2024: Alongside the TDS revisions, other significant tax updates include:
TDS on floating rate bonds: A 10% TDS now applies to central and state government bonds, including floating rate bonds, on revenue exceeding Rs 10,000 annually.
Share buybacks: Share buybacks will now be subject to shareholder-level taxes, similar to dividends, increasing the tax burden for investors.
Securities Transaction Tax (STT): The STT on Futures & Options (F&O) has risen to 0.02% and 0.1%, respectively, with additional taxes on share buybacks.
TDS on sale of immovable property: Sales of immovable property exceeding Rs 50 lakh will face a 1% TDS, even in transactions involving multiple buyers or sellers.
Impact on taxpayers
While lower TDS rates on certain transactions may bring some relief, other updates, such as the increased STT and new buyback taxes, could result in higher financial obligations for investors.
Taxpayers should take note of these changes and ensure they are compliant with the new rules from today, October 1, 2024.
