BUDGETARY AMENDMENTS OF CHAPTER XVII OF INCOME TAX ACT, 1961 [TDS PROVISIONS]

[DR.MARIAPPAN GOVINDARAJAN]

Section 51 to Section 65 of the Finance Bill (‘Bill’ for short) amended the provisions of Sections 193 to 194LBC of Income Tax Act, 1961 (‘Act’ for short) relating to tax deducted at source. 

Interest on securities

Sec. 51 of the bill amends Section 193 of the Act.  Section 193(1) of the Act provides that the person responsible for paying ¹[to a resident] any income ²by way of interest on securities] shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier *being the amount or the aggregate of amounts exceeding Rs.10,000/- during the financial year, deduct income-tax at the rates in force on the amount of the interest payable.

*inserted by the Bill.

Any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if the interest does not exceed Rs.10,000/-.

Dividends

The Bill also raised the amount for which tax is to be deducted at source for payment of dividends.  The Bill amended Section 194 providing that no tax shall be deducted at source on the payment of dividends up to a sum of Rs.10,000/- per year.

Interest other than interest on securities

Section 194A of the Act provides for the deduction at source on the interest other than interest on securities.  According to the amendment no tax shall be deducted where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person the payee, does not exceed-

• Rs.50,000/- where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act); (previously Rs.40,000/-)
• Rs.50,000/- where the payer is a co-operative society engaged in carrying on the business of banking; (previously Rs.40,000/-)
• Rs.50,000/- on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; (previously Rs.40,000/-) and
• Rs.10,000/- in any other case. (previously Rs.5000/-).

This limit for the Senior Citizens is increased to Rs.1 lakh from the previous limit Rs.50,000/-This enhanced limit is also application to the Senior Citizens in respect of interest earned from the deposits with Co-operative bank.  For others this amount is increased to Rs.50,000/- from Rs.40,000/-.

Winnings from Lottery or crossword puzzle etc.

Section 194B provides the limit of aggregate transaction exceeding Rs.10,000/- tax is liable to  be deducted.  Section 194BB of the Act provides for the deduction of tax exceeding the limit of Rs.10,000/- for the aggregate transactions in a financial year.  The Bill amended in both the aggregate transaction as a single transaction, not for a whole financial year.

Insurance Commission

Section 194D provides for the deduction of tax at source on the insurance commission, if the same exceeds Rs.50,000/-.  The bill reduces the limit to Rs.20,000/- from Rs.50,000/-.

Commission on Sale of lottery tickets

Section 194G provides for the deduction of tax at source on the commission payable on the sale of lottery tickets if the same exceeds Rs.50,000/-.  The bill reduces the limit to Rs.20,000/- from Rs.50,000/-.

Commission on brokerage

Section 194H provides for the deduction of tax at source on the commission payable on the brokerage if the same exceeds Rs.50,000/-.  The Bill reduced the said limit of Rs.50,000/- to Rs.20,000/-.

Rent

Section 194I provides for the deduction of tax at source for the payment of rent paid to the building if the amount exceeds Rs.2,40,000/- per year.  Now the Bill modifies this as ‘no deduction shall be made under this section, where the income by way of rent credited or paid for a month or part of a month by such person to the account of, or to, the payee, does not exceed Rs.50,000/-.

Fees for technical or professional services

Section 194J provides for the deduction of tax at source for the payment of fees for professional services; fees to technical services; remuneration or fees payable to a Director of a company; royalty and any amount receivable under any agreement.  The limit for deduction of tax for these categories are fixed @ Rs.30,000/-.  The Bill has increased the said limit to Rs.50,000/-.

Income in respect of units

Section 194K of the Act provides for the deduction of tax at source for the income derived from units of mutual funds/specified companies/Administrator of the specified undertakings above Rs.5000/-.  The Bill has enhanced this limit to Rs.10,000/-

Compensation on acquisition of immovable property

Section 194LA of the Act provides for the deduction of tax source for the compensation received under Land Acquisition Act for the amount more than Rs.2.50 lakhs.  The Bill now enhances this amount to Rs.5 lakhs.

Income from investment in securitisation trust

Section 194LBC of the Act provides for the deduction of tax at source for the income received from the investment in securitisation trust @ 35% if the payee is an individual or a HUF; 30% if the payee is any other person.  The Bill now reduced these two rates to 10%.