CHANGES IN TDS RATES & THRESHOLD LIMIT WEF 01.06.2016

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Under the scheme of deduction of tax at source as provided in the Act, every person responsible for payment of any specified sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the Central Government within specified time. However, no deduction is required to be made if the payments do not exceed prescribed threshold limit.

In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are proposed to be revised as mentioned in table 1 and table 2 respectively.

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Table 1: Increase in threshold limit of deduction of tax at source on various payments mentioned in the relevant sections of the Act

Section	Heads	Existing Threshold Limit (Rs.)	Proposed Threshold Limit (Rs.)
1 92A	Payment of accumulated balance due to an employee	30,000	50,000
194BB	Winnings from Horse Race	5,000	10,000
194C	Payments to Contractors	Aggregate annual limit of 75,000	Aggregate annual limit of 1,00,000
194LA	Payment of Compensation on acquisition of certain Immovable Property	2,00,000	2,50,000
194D	Insurance commission	20,000	15,000
194G	Commission on sale of lottery tickets	1,000	15,000
194H	Commission or brokerage	5,000	15,000

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Table-2 : Revision in rates of deduction of tax at source on various payments mentioned in the relevant sections of the Act:

Section	Heads	Existing Rate of TDS (%)	Proposed Rate of TDS (%)
194DA	Payment in respect of Life Insurance Policy	2%	1%
194EE	Payments in respect of NSS Deposits	20%	10%
194D	Insurance commission	Rate in force (10%)	5%
194G	Commission on sale of lottery tickets	10%	5%
194H	Commission or brokerage	10%	5%

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These amendments will take effect from 1^st June, 2016.

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Snapshot of Changes in TDS Limits and Rates wef 1st June, 2016

NOTE:

• Section 192A (Payment of accumulated balance of PF due to an employee)-Proposed to increase the threshold limit from Rs. 30,000/- to Rs. 50,000/- for the purpose of deducting of TDS w.e.f. 1st June 2016. 

• Section 194BB (Winnings from Horse Race)- Proposed to increase threshold limit from Rs. 5,000/- to Rs 10,000/- for the purpose of deducting of TDS w.e.f. 1st June 2016. 

• Section 194C (Payments to Contractors) - Proposed to increase the aggregate threshold limit from Rs. 75,000/- to Rs.1,00,000/- w.e.f. 1st June, 2016. 

• Section 194D (Insurance Commission) Proposed to decrease threshold limit from Rs. 20000/- to Rs. 15000/- and rate of TDS also decreased from 10% to 5% w.e.f. 1st June 2016 

•  Section 194DA (Payment in respect of Life Insurance Policy)- Proposed to decrease the rate of TDS from 2% to 1%. w.e.f. 1st June 2016. 

• Section 194EE (Payments in respect of NSS Deposits)- Proposed to decrease the rate of TDS from 20% to 10% w.e.f. 1st June 2016. 

• Section 194G (Commission on sale of lottery tickets)- Proposed to increase threshold limit from Rs. 1,000/- to Rs. 15,000/- and Rate of TDS is decrease from 10% to 5% w.e.f 1st June 2016. 

• Section 194H (Commission or brokerage) - Proposed to increase threshold limit from Rs. 5,000/- to Rs. 15,000/- and rate of TDS decreased from 10% to 5% w.e.f 1st June 2016 

• Section 194K (Income in respect of Units) and Section 194L (Payment of Compensation on acquisition of Capital Asset)- Proposed to be omitted w.e.f. 1st June 2016. 

• Section 194LA (Payment of compensation on acquisition of certain immovable property) - Proposed to increase the threshold limit from Rs.2,00,000/- to Rs.250000/- w.e.f. 1st June, 2016. 

• Section 194LBB (Units of Investment Funds) to deducted TDS – (a) at the rate of 10% where the payee is a resident; (b) at the rates in force, where the payee is a non-resident (not being a company) or a foreign company w.e.f 1st June 2016 

• Section 194LBC is proposed to be inserted where any income is payable to an investor, being a resident, in respect of an investment in a securitisation trust TDS is to be made @: (i) 25% if the payee is an individual or a Hindu undivided family; (ii) 30% if the payee is any other person. 

• It is proposed to amend section 197 to include section 194LBB, 194LBC in the list of sections for which a certificate for deduction of tax at lower rate or no deduction of tax can be obtained w.e.f 1st June 2016 

• It is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194-I (Rent) also eligible for filing self-declaration in Form no 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A w.e.f 1st June 2016 

• It is proposed to amend section 206AA so as to provide that the said section shall not apply to a nonresident, not being a company, or to a foreign company, in respect of- (a) Payment of interest on long term bond referred in section 194 LC; (b) Any other payment subject to condition as may be prescribed on w.e.f 1st June 2016. 

• It is proposed to amend the section 206C (TCS) to provide that the seller shall collect the tax at the rate of 1%: (a) from the purchaser on sale of motor vehicle of the value exceeding Rs. 10 Lacs; and (b) sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payments on which TDS is made) exceeding Rs. 2 Lacs w.e.f 1st June 2016.

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WRITTEN BY: SOURAV BAGARIA