TDS is Tax Deducted at Source. It is an indirect way for India's government to raise income tax at source. Union Finance Bill 2020 was presented by India’s Finance Minister Nirmala Sitharaman which introduced various amendments for various income tax and the new tax regime for FY 2020-21.
Several amendments in the TDS and TCS regulations that will take effect this financial year were brought on by the Union Budget 2020.
TDS is income tax deducted from the taxes paid by people making such payments as salaries, interest, dividends, etc.
The person who earns income normally is liable to pay income tax. But the government makes sure, with the aid of TDS rules, that income tax is deducted from the payments made at source by employer or company.
TDS is a form of pre-tax. It is a tax that must be annually deposited with the government, and it is the payer who must do the same on time. In the case of the assessee, after sending their ITR the deducted TDS can be received by way of a tax refund.
KEY AMENDMENTS IN TDS TAX REGIME:
Under Section 115BAC of the income tax act, the State has made a significant adjustment to the tax regime. New sections, as well as modifications in existing sections, were also implemented.
1. The choice was given for taxpayers whether to pay taxes under the new tax regime or if they want to continue paying taxes under the current scheme.
However, if a few taxpayers opt to obey the new tax regime, they will not be able to return to the old tax regime
Employees who do not issue the employer with a statement will continue to be charged as previously under the old tax regime.
Employees who do not have professional or business income will have to notify their employers of their decision to apply for the new tax regime for the TDS deduction tax on salaries.
2. TDS on salary In Section 192 of the TDS, subsection 1C was added. The employer shall pay tax on such income, as the case may be, based on the rates in place for the financial year in which the said security or sweat equity is allocated or transferred.
3. Section 194: the dividend to the shareholder resident in India paid by Indian firms, TDS @ 10%, if the sum of the dividend during the FY exceeds ₹5000.
Dividend declared by domestic companies was subject to DDT and the earned dividend was not taxable in the recipient's hands excluding revenue exceeding 10 Lakhs.
With effect from 1 April 2020, the received dividend is taxable in the recipient's hands if it is paid in any manner if the profit exceeds Rs. 5000 at a rate of 10%.
4. 194A - because some assessee used the loophole of this provision by buying material from their associates or related parties, the word "work" has been modified.
6. Section 194A - TDS Section 194A refers to interest other than interest on securities issued or payable to any resident by:
- Any other person than an individual or HUF;
- Individual or HUF falling under Category 44AB(a) or 44AB(b)
- 44AB(a) covers those companies whose overall turnover or gross revenue exceeds ₹1 crore for the financial year.
- 44AB(b) comprises those professionals whose Cumulative Gross Receipts surpass ₹50 Lakhs for a financial year.
7. Section 194: Dividend on shares issued by a corporation above Rs 5000 is subject to TDS @ 10%
TDS has been reduced to 2% from 10% under section 194J- Technical services fees.
The TDS was 10 percent for both professional and technical services. Amendment was tabled to reduce the technical services tax rate i.e. for professional service it is still 10%
8. Section 194K: Dividend issued by mutual funds to a resident TDS 10% is deducted only if the volume of the dividend exceeds 5000 during the FY.
This clause only refers to the unit income and not to capital gain.
9. Section 194O: The operator shall only deduct 1% TDS in any payment by the e-commerce provider to the consumer where the annual payment sum is above Rs 5 lakh.
Where the sales of products or services to a participant in e-commerce is facilitated through its digital facility or network by an E-commerce operator.
Such an E-commerce operator shall by any means at the time the payment is made of the value of the sale or the delivery of services or both deduct such TDS as applicable.
The new tax regime with revised income tax slabs shall be applicable for 1st April 2020. Once opted assessee cannot change from a new tax regime to the old tax regime.
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