Last Updated on August 7, 2020 by Ravi Sankar Robbi
TDS Changes in Budget 2019:
Budget 2019 has made few changes in TDS provisions which are effective from 1st September, 2019 onwards. These TDS changes in Budget 2019 includes the introduction of two more sections (i.e. Sec 194M & Sec 194N) to widen the tax base.
Earlier payments made by any individual taxpayers are not covered under the provisions of TDS. But now, even the individual taxpayers are also covered under this gamut. Summary of the amendments as per Budget 2019 is as follows:
- TDS on proceeds from Life Insurance Policy – Sec 194DA
- TDS on amount paid to acquire immovable property – Sec 194IA
- TDS on payments made by individual or HUF for any work – Sec 194M
- TDS on cash withdrawals – Sec 194N
TDS on proceeds from Life Insurance Policy – Sec 194DA (Amended)
If any person makes a payment in respect of an insurance policy to a resident (including bonus) and if such amount exceeds Rs. 1,00,000 in a financial year, it attracts TDS at 1 percent under this section. Such tax should be deducted at the time of payment. However, any sum covered under Sec 10(10D) is not chargeable to TDS.
The existing rate of TDS of 1 percent now is revised to 5 percent.
TDS on amount paid to acquire immovable property – Sec 194IA (Amended)
If any immovable property other than agricultural land is transferred by a resident to any person and consideration for such transfer is in excess of Rs. 50,00,000, then consideration payable by transferee (i.e. buyer of the property) to the transferor (i.e. seller of the property) attracts TDS at 1 per cent. Such tax should be deducted either at the time of credit or payment.
Though there is no change in the rate of TDS, it has widened the base for taxability of the consideration.
â€œconsideration for immovable propertyâ€ shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property
As per the amended explanation, consideration includes any other amount collected by the seller of the property from the buyer in addition to the amount charged for such property.
Hence, any other amount charged in addition to the value of the property is also to be considered for determining the applicability of this section.
Also Read: A complete guide on TDS
TDS on payments made by individual or HUF for any work – Sec 194M (Newly inserted section)
Any individual or HUF (except who are covered under the provisions of sec 194C, 194H & 194J) is liable to pay any sum as a commission (except insurance commission) or brokerage or fee for professional services to a resident for carrying out any work including supply of labour and if such sum exceeds Rs. 50,00,000 in a financial year, then payer is liable to deduct tax at 5 percent on such sum at the time of credit or payment whichever is earlier.
Prior to insertion of this section, any payments made by an individual or HUF to any person for carrying out any work or professional services for their personal purpose is not subject to TDS.
Also, there is no requirement to deduct tax on payments made for their business by an individual or HUF who are not subject to tax audit. But now all these payments are covered under the purview of TDS.
TDS on cash withdrawals – Sec 194N (Newly inserted section)
A banking company or a co-operative society engaged in business of banking or a post office, which pays any amount in excess of one crore rupees in a financial year to any person from the account maintained with such bank or co-operative society or post office shall deduct income tax at 2 percent on such amount paid during the year. Such tax should be deducted at the time of payment.
However, to clarify the ambiguity on the applicability of this provision, CBDT recently issued a press release dated 30th August, 2019 and the same is summarized below for easy understanding.
- Any cash withdrawals prior to 1st September, 2019 are not subject to TDS under this section.
- For computing threshold limit of one crore rupees, cash withdrawals from 1st April, 2019 also should be considered.
- If cash withdrawals made during 1st April, 2019 â€“ 31st August, 2019 is one crore or more, then all subsequent withdrawals are subject to TDS.
As the above amendments are effective from 1st September, 2019 payer has to check the applicability of these provisions before making any payment and the same has to be complied to avoid the interest/penalty arising out of such default under Income Tax Act.
Author is a Qualified CMA with an experience of more than 8 years in the industry. He is also an All India Rank holder in both Inter (AIR-26) & Final (AIR-46) examinations of ICAI. He loves to writes articles on Income Tax & GST.