New TDS rates from today: These transactions will be affected

Several key tax changes, including revisions to the tax at source (TDS) framework, will come into effect from today (October 1, 2024) as outlined in the Union Budget 2024.

These updates affect a range of transactions, from rental and insurance payments to e-commerce and more.

What is TDS?

TDS (Tax Deducted at Source) is a mechanism where taxes are deducted at the time of payment and then paid to the government.

The payee can later claim credit based on Form 26AS or a TDS certificate.

Important TDS rate changes from October 1, 2024

Section 194DA (Life Insurance Payments): The TDS rate on life insurance payouts has come down from 5% to 2%.

§ 194G (lotto ticket commission): The TDS on commission from sale of lottery tickets will be reduced from 5% to 2%.

Section 194-IB (Rental Payments): A TDS rate of 2% (previously 5%) now applies to rental payments from individuals or HUF.

Section 194M (Certain Payments by Individuals or HUF): Individual or HUF payments will now be subject to 2% TDS rate reduced from 5%.

Section 194-O (E-Commerce Operators): Payments made by e-commerce operators to participants will now attract a TDS rate of 0.1% (previously 1%).

Section 194F (Repurchase of Mutual Funds): TDS on buybacks by mutual funds or Unit Trust of India has been omitted.

Additional tax changes from October 1, 2024: Apart from the TDS revisions, other key tax updates include:

TDS for Floating Rate Bonds: Central and state government bonds, including floating rate bonds, will now attract TDS of 10% if the income exceeds Rs 10,000 per annum.

Share buybacks: Share buybacks are now subject to shareholder tax, similar to dividends, increasing the tax burden on investors.

Securities transaction tax (STT): The STT for Futures & Options (F&O) increased to 0.02% and 0.1% respectively, with additional taxes on share buybacks.

TDS on sale of property: A TDS of 1% is levied on the sale of properties above Rs 50 lakh, even in transactions involving multiple buyers or sellers.

Impact on taxpayers

While lower TDS rates could provide some relief in certain transactions, other updates such as increased STT and new buyback taxes could result in higher financial liabilities for investors.

Taxpayers should take note of these changes and ensure they comply with the new rules starting today, October 1, 2024.