New rates of Tax Deducted at source (TDS) and Tax Collected at source (TCS) under Income Tax Act, 1961 are announced in second week of May, in amidst of COVID – 19. As per the Press release on 13th May 2020, TDS and TCS rate have been reduced by 25%, to increase liquidity in the Indian Economy.
Read Also: TDS Rate Chart for FY 2022-23/AY 2023-24 – Income Tax
Self assessment tax is paid after the end of financial year, while advance tax is paid during the financial year. TDS is deducted when income is accrued or received by the assesse and adjusted with the income tax liability at the time of filing the Income Tax Return. For FY 2020-21, Old TDS rates are applicable from 1st April 2020 to 13th April 2020 whereas new TDS rates are applicable from 14th May 2020 to 31st March 2020.
TDS Rates chart for Financial Year 2020 -21
| Section and Nature of payment | Rate upto 13th May 2020 | Rate from 14th May 2020 |
| 192 – Salaries | Normal Slab | Normal Slab |
| 192 A – Receiving accumulated tax part of Provident Fund (Premature withdrawal from EPF) | 10 % | 10 % |
| 193 – Interest received on securities | 10 % | 7.5 % |
| 194 – Dividend received from Mutual Funds | 10 % | 7.5 % |
| 194 A – Interest other than interest on securities | 10 % | 7.5 % |
| 194 B – Winning from lottery, crossword puzzle | 30 % | 30 % |
| 194 BB – Winning from horse races | 30 % | 30 % |
| 194 C – Payments to contractors 1. Individuals / HUF 2. Others | 1% 2% | 0.75% 1.5% |
| 194 D – Insurance commission received by an individual | 5 % | 3.75 % |
| 194 DA – Life insurance policies not exempt under section 10(10D) | 5 % | 3.75 % |
| 194 E – Payments to non – resident sports men or sports associations | 20 % | 20 % |
| 194 EE – Payments in respect of deposits under National Saving Schemes, etc | 10 % | 7.5 % |
| 194 F – Repurchase of units by Mutual Funds or Unit Trust of India | 20 % | 15 % |
| 194 G – Commission, etc on sale of Lottery Tickets | 5 % | 3.75 % |
| 194 H – Commission or brokerage received except for Insurance Commission | 5 % | 3.75 % |
| 194 I – Rent 1) Plant, Machinery, Equipment 2) Land or Building | 2 % 10 % | 1.5 % 7.5 % |
| 194 IA – Transfer of Immovable property other than agricultural Land | 1 % | 0.75 % |
| 194 IB – Payment of rent my Individual or HUF exceeding Rs. 50,000 per month | 5 % | 3.75 % |
| 194 IC – Payment made under specified agreement | 10 % | 7.5 % |
| 194 J – Fees for Professional or technical Services | 10 % | 7.5 % |
| 194 K – Income in respect of units | 10 % | 7.5 % |
| 194 LA – Compensation on acquisition of certain immovable properties | 10 % | 7.5 % |
| 194 LB – Income as interest from Infrastructure debt fund | 5 % | 5 % |
| 194 LBA – Certain incomes from units of business trust | 10 % | 7.5 % |
| 194 LBB – Income from units of investment fund | 10 % | 7.5 % |
| 194 LBC – Income from investment in Securitisation Trust 1. Individual 2.Company 3.Other Person | 25 % 30 % 30 % | 18.75% 22.50% 22.50% |
| 194 LC – Income as Interest from Indian Company | 5 % | 5 % |
| 194 LD – Income as interest from certain bonds and Government Securities | 5 % | 5 % |
| 194 M – Certain payments by Individual or HUF | 5 % | 3.75 % |
| 194 N – Certain payments in cash | 2 % | 2 % |
| 195 – Income from investments made by NRI | 10 % | 10 % |
| 196 A – Income in respect of Units of Non residents | 20 % | 20 % |
| 196 B – Income from units to Offshore fund | 10 % | 10 % |
| 196 C – Income from foreign currency bonds or shares of an Indian company | 10 % | 10 % |
| 196 D – Income of Foreign Institutional Investors from securities | 20 % | 20 % |
New income tax rate for salaried employees- Important clarifications
TCS rates chart for FY 2020- 2021
| Section – Nature of Payment | Rate upto 13th May 2020 | Rate from 14th May 2020 |
| 206 C – Alcoholic Liquor for human consumption | 1 % | 1% |
| 206 C – Tendu Leaves | 5 % | 3.75% |
| 206 C –Timber obtained from Forest lease, or any other mode | 2.5 % | 1.875% |
| 206 C – Forest produce other than timber or tendu leaves | 2.5 % | 1.875% |
| 206 C – Scrap | 1 % | 0.75% |
| 206 C – Minerals, being coal or lignite or iron ore | 1 % | 0.75% |
| 206 C – Parking lot, Toll Plazza, Mining and quarrying | 2 % | 1.5% |
| 206 C – Sale of Motor Vehicle | 1 % | 0.75% |
However, there is no reduction of rates for Non- Residents. Also, where PAN or Aadhaar is not furnished, tax is required to be deducted or collected at higher rate due to non-furnishing of PAN or 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%.
Important Income Tax Penalties under Income Tax Act, 1961
How to calculate TDS Rates for FY 20-21?
The liability to deduct TDS arises earlier of-
- Making payment to the payee, or
- Crediting the payee account
Therefore, where liability to deduct TDS arises before 14th May 2020 – Old rates are applied. However, where liability to deduct TDS arises on or after 14th may 2020, New TDS rates are applied. Let’s go through calculation of TDS on various cases-
1. TDS on Commission or brokerage : Section 194 H
BabaTax Private Ltd pays Ms. Siya brokerage of Rs. 20,000 per month on or before 10th of the month for the services provided. Calculation of TDS under Income Tax Act will be as follows:
From April to May 2020 : 2 X 20,000 X 5 % = Rs. 2000
From June 2020 to March 2021 : 10 X 20,000 X 3.75 % = Rs. 7500
Hence, total TDS to be deducted – Rs. 2000 + Rs. 7500 = 9500
However, if the brokerage amount of Rs. 20,000 is paid at the last day of month, then calculation of TDS will be as follows-
For April 2020 : 1 X 20,000 X 5 % = Rs. 1000
From May 2020 to March 2021 : 11 X 20,000 X 3.75 % = Rs. 8250
Hence, total TDS to be deducted – Rs. 1000 + Rs. 8250 = Rs. 9250
How to pay TDS online?- TDS का भुगतान Online कैसे करें?
2. TDS on Rent : Section 194 I
BabaTax is having it’s office at prime location in New Delhi, and they are paying rent of Rs. 40,000 per month on 1st day of every month.
Now, TDS on rent for the month of April 2020 and May 2020 – 2 X 40,000 X 10 % = 8,000
TDS from the month of June to March 2020 – 10 X 40,000 X 7.5 % = Rs. 30,000
Therefore, total TDS on rent for the year 2020 will be Rs. 30,000 + Rs. 8,000 = Rs. 38,000
New Income Tax Rates & existing Income Tax Rates : Quick comparison
3. TDS on Interest : Section 194 A
On 15.05.2020, Mr. Bean has started Fixed Deposit with SBI of Rs. 50,00,000 for 90 days, fetching interest at 8% per annum. It will mature on 13th August, and SBI has to pay interest to Mr. Bean and deduct TDS from the payment.
TDS on interest to be deducted for 90 days = Rs. 50,00,000 X 8 % X 90 / 365 X 7.5 % = Rs. 7397.26
Tax Rates calculation on Interest from Saving A/c, PPF, Fixed Deposits, R/D
4. TDS on Professional Fee : Section 194 J
Jio Ltd paid Rs. 50,000 as sitting fee to the director, Mr. Tom for a General Meeting on 25th May,2020. In this case, amount of TDS to be deducted : 50,000 X 7.5 % = Rs. 3,750
For any questions, you may reach us at Discussion Forum
The author of the above article is CA Ankita Gandhi.
Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon.
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