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Reduction in Rate of Tax Deduction at Source (TDS) & Tax Collection at Source (TCS)

1. In order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, the rates of Tax Deduction at Source (TDS) for the following non-salaried specified payments made to residents has been reduced by 25% for the period from 14th May, 2020 to 31st March, 2021:-

S.No Section of the Income-tax Act Nature of Payment Existing Rate of TDS Reduced Rate From 14/05/2020 to 31/03/2021
1 193 Interest on Securities 10% 7.5%
2 194 Dividend 10% 7.5%
3 194A Interest other than interest on securities 10% 7.5%
4 194C Payment of Contractors and sub-contractors 1% (individ-ual/HUF) 2% (others) 0.75% (individual/HUF) 1.5% (others)
5 194D Insurance Commission 5% 3.75%
6 194DA Payment in respect of life insurance policy 5% 3.75%
7 194EE Payments in respect of deposits under National Savings Scheme 10% 7.5%
8 194F Payments on account of re-purchase of Units by Mutual Funds or UTI 20% 15%
9 194G Commission, prize etc., on sale of lottery tickets 5% 3.75%
10 194H Commission or brokerage 5% 3.75%
11 194-I(a) Rent for plant and machinery 2% 2.5%
12 194-I(b) Rent for immovable property 10% 7.5%
13 194-IA Payment for acquisition of immovable property 1% 0.75%
14 194-IB Payment of rent by indi- vidual or HUF 5% 3.75%
15 194-IC Payment for Joint Devel- opment Agreements 10% 7.5%
16 194J Fee for Professional or Technical Services (FTS), Royalty, etc. 2% (FTS, certain royalties, call centre) 10% (others) 1.5% (FTS, certain royaties, call cen- tre)7.5% (others)
17 194K Payment of dividend by Mutual Funds 10% 7.5%
18 193LA Payment of Compensa- tion on acquisition of im- movable property 10% 7.5%
19 194LBA(1) Payment of income by Business trust 10% 7.5%
20 194LBB(i) Payment of income by In- vestment fund 10% 7.5%
21 194LBC(1) Income by securitisation trust 25% (Individ- ual/HUF) 30% (Others) 18.75% (Indi- vidual/HUF) 22.5% (Others)
22 194M Payment to commission, brokerage etc. by Individ- ual and HUF 5% 3.75%
23 194-O TDS on e-commerce par- ticipants 1%(w.e.f. 1.10.2020) 0.75%
 

2. Further, the rate of Tax Collection at Source (TCS) for the following specified receipts has also been reduced by 25% for the period from 14th May, 2020 to 31st March, 2021:-

S.No Section of the Income-tax Act Nature of Payment Existing Rate of TDS Reduced Rate From 14/05/2020 to 31/03/2021
1 206C(1) Sale of
(a) Tendu Leaves 5% 3.75%
(b)Timber obtained under a forest lease 2.5% 1.875%
(c) timber obtained by any other mode 2.5% 1.875%
(d) Any other forest produce not being timber/tendu leaves 2.5% 1.875%
(e) scrap 1% 0.75%
(f) Minerals, being coal or lignite or iron ore 1% 0.75%
2 206C(1C)
Grant of license, lease, etc. of(a) Parking lot 2% 1.5%
(b) Toll Plaza 2% 1.5%
(c) Mining and quarrying 2% 1.5%
3 206C(1F) Sale of motor vehicle above 10 lakhs 1% 0.75%
4 206C(1H) Sale of any other goods 0.1%(w.e.f 01.10.2020) 0.75%

3. Therefore, TDS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table in para 1 above. Similarly, the tax on the amount received or debited during the period from 14th
May, 2020 to 31st March, 2021 shall be collected at the reduced rates specified in the table in para 2 above.

4. It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/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%.

5. Legislative amendments in this regard shall be proposed in due course.