Finance Minister Nirmala Sitharaman unveiled significant changes in the Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) norms during the Union Budget for 2024-25. These reforms aim to simplify tax compliance and provide relief to taxpayers across various sectors. Here are the full details of the ten key changes that will impact individuals and businesses alike.
Key Changes in TCS and TDS Norms
- Credit for TCS Against TDS
One of the most notable changes is allowing salaried employees to claim credit for TCS against TDS deducted on their salaries. This will enhance cash flow for employees, as they can now offset TCS against their TDS obligation, rather than waiting for a refund during tax return filing. This change will take effect from October 1, 2024. - Reduction of TDS on Rent Payments
The TDS rate on rent payments has been reduced from 5% to 2% for individuals or Hindu Undivided Families (HUF) paying more than ₹50,000 per month. This reduction aims to ease the financial burden on tenants, particularly in high-rent markets, and will also be effective from October 1, 2024. - Clarification on Property Transactions
The budget clarifies that the 1% TDS on property sales exceeding ₹50 lakh applies collectively when multiple buyers or sellers are involved. This change aims to eliminate ambiguity in property transactions and will also come into effect on October 1, 2024. - New TDS Section for Partnership Firms
Starting April 1, 2025, payments exceeding ₹20,000 annually to partners by partnership firms will attract a new TDS rate of 10%. This amendment aims to bring more transactions under the tax net and ensure compliance with tax regulations. - E-commerce Operators’ TDS Rate Reduction
The budget proposes reducing the TDS rate for e-commerce operators from 1% to 0.1%. This change is designed to alleviate the compliance burden on digital marketplaces and streamline operations within the sector. - TCS Credits for Minors’ Income
Previously, minors could only claim their TCS credits if their income was not clubbed with their parents’. Now, parents can adjust these credits against their tax liabilities if the minor’s income is included in theirs. This provision will take effect from January 1, 2025. - Elimination of Certain High Rates
The budget has eliminated the previously applicable 20% TDS on repurchase of mutual fund or UTI units, further simplifying the tax landscape for investors. - Decriminalization of Delayed Payments
To reduce compliance burdens, delays in TDS payments up to the due date of filing the TDS statement will be decriminalized. This measure aims to ease concerns surrounding penalties for late payments. - Simplification for Charities
The budget consolidates two distinct tax exemption regimes for charities into a single framework, making compliance simpler and more straightforward for charitable organizations. - Increased Interest Rates for Non-Payment of TCS
The interest rate for late payment of TCS has been increased from 1% to 1.5% per month. This change aims to encourage timely compliance among taxpayers.
Implications of These Changes
These reforms are expected to significantly impact disposable income and simplify tax processes across various sectors. By enhancing cash flow and reducing compliance burdens, they aim to create a more taxpayer-friendly environment.
