Revised TDS rates from October 1: Here are the new tax deducted at source rates on various transactions

The Union Budget 2024 included several significant proposals, which have been ratified in the Finance Bill. Some of these changes have come into effect from October 1. These changes included revised TDS rates applicable from October 1, 2024.

What is TDS

According to the Income Tax website, “The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.”

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TDS rates from October 1
The Tax Deducted at Source (TDS) rates proposed in the Union Budget 2024 have been approved in the Finance Bill:

• The TDS rate for payments under sections 19DA, 194H, 194-IB, and 194M was reduced from 5% to 2%.
• TDS rate reduction for e-commerce operators: The TDS rate for e-commerce operators was reduced from 1% to 0.1%.
• Section 194DA - Payment in respect of life insurance policy is reduced from 5% to 2%. This will be effective from October 1, 2024.
• Section 194G – Commission etc on sale of lottery tickets is reduced from 5% to 2%. This will be effective from October 1, 2024.
• Section 194-IB - Payment of rent by certain individuals or HUF is proposed to be reduced from 5% to 2%. This will be effective from October 1, 2024.
• Section 194M - Payment of certain sums by certain individuals or Hindu undivided families is reduced from 5% to 2%. This will be effective from October 1, 2024.
• Section 194-O - Payment of certain sums by e-commerce operators to e-commerce participants is reduced from 1% to 0.1%. This will be effective from October 1, 2024.
• Section 194F relating to payments on account of repurchase of units by Mutual Fund or Unit Trust of India is proposed to be omitted. This will be effective from October 1, 2024.

Other tax rules applicable from October 1

Floating rate bonds TDS
In Budget 2024, it was announced that starting from October 1, 2024, tax deducted at source (TDS) will be deducted at a 10% rate from specified central and state government bonds, including floating rate bonds.

There is a Rs 10,000 threshold limit, after which the tax is deducted. This means that there is no TDS if the revenue earned throughout the year is less than Rs 10,000.

Revised TDS rates, STT, Aadhaar card rules: 6 income tax Budget 2024 changes applicable from October 1, 2024

Buy-back of shares
As of October 1, buyback of shares will be subject to shareholder-level taxes, much like dividends. This will result in a higher tax burden for investors. Additionally, the shareholder's acquisition costs of these shares will be taken into account when calculating any capital gains or losses.

STT
The 2024 budget has increased the securities transaction tax (STT) on Futures & Options (F&O) of securities to 0.02 percent and 0.1 percent respectively and income receipts from share buybacks would be taxed in the hands of beneficiaries.

This amendment is passed and to be made effective from October 1, 2024.

TDS on sale of immovable property
Section 194-IA: This provision stipulates that payments for the sale of immovable property exceeding Rs 50 lakh must include a 1% TDS. In transactions involving many buyers or sellers, the new budget makes it clear that this rule applies collectively. The amendments will take effect from the 1st day of October, 2024.