TDS on dividend, rent, insurance payment cut by 25%

Tax deducted or collected at source on payment of dividend, insurance policy, rent, professional fee and on the acquisition of immovable property has been cut by 25 per cent for a period up to March 31, the tax department has said.

Following Finance Minister Nirmala Sitharaman’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) notified revised rates that will be applicable from May 14, 2020, to March 31, 2021.

   

Clarifying on why the TDS rate has not been reduced for salaried class, Finance Secretary Ajay Bhushan Pandey on Thursday said TDS is deducted from salary after taking into account various eligible deductions like 80C and others of the salaried person.

This, he said, has been done to ensure that salaried individual do not have to bear the burden of paying high taxes at the year end and also the interest burden.

“If we reduced the TDS rate for salaried class then their compliance burden would have increased because they would be required to pay higher taxes at the year end along with interest. Hence TDS rate has not been cut for salaried class,” he said.

He further said that cash withdrawal above Rs 1 crore from banks would continue to attract 1 per cent TDS and such transaction would not enjoy the benefit of reduced TDS rate. Similarly, there has been no cut in TDS rate for foreign remittances as well as where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.

Speaking to reporters, Pandey said there are 23 such items in which there is a reduction in TDS rate, 7 items with lower TCS. He said a 10 per cent TDS was levied on interest on securities, interest on bank account, dividend payments, which has now been reduced to 7.5 per cent.

In the notification, the CBDT said 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.

The CBDT said TDS on payment for life insurance policy has been reduced to 3.75 per cent from 5 per cent, while that on dividend and interest as well as rent for immovable property has been cut 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.

TDS on e-commerce participants has also been reduced to 0.75 per cent from 1 pr cent. Similarly, tax on professional fee has been reduced to 1.5 per cent from 2 per cent.

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