Insights

REVISION IN RATES OF TDS:

In first of the economic packages as announced by Finance Minister on 13th May, 2020, the rates of TDS have been reduced by 25% from the existing rates. We must not forget the basic rule i.e. TDS is applicable on payment or credit whichever is earlier basis and hence if account of a party is already credited or payment is made on or before 14th May, 2020 then old rates shall continue to apply and new rates shall not apply. However, if a party is credited on or after 14th May, 2020 by booking the Invoice in books of accounts, then TDS on such expense shall be applicable at new rates.

The Comparative rate chart is as under:

 

 

Section

Old Rate (01.04.2020 –

13.05.2020) %

New Rate (14.05.2020-

31.03.2021) %

193 - Interest on Securities

10

7.5

 

 

 

194 – Dividend

10

7.5

 

 

 

194A – Interest other than Interest on Securities

10

7.5

 

 

 

194C – Payment to Sub- Contractors

 

 

Individual and HUF

1

0.75

Others

2

1.50

 

 

 

194 D – Insurance Commission

5

3.75

 

 

 

194H – Commission or Brokerage

5

3.75

 

 

 

194I (a) – Plant and Machinery

2

1.5

 

 

 

(b) – Immovable Property

10

7.5

 

 

 

194-IA – Payment for Acquisition of Immovable Property (Exceeding 50 Lacs)

1

0.75

 

 

 

194 – IB – Payment of Rent by Individual/HUF in excess of Rs. 50,000/p.m.

5

3.75

 

 

 

194 J-Professional or Technical Services

 

 

Technical Service, Specified Royalty

2

1.5

Professional Service

10

7.5

 

 

 

194 K – Dividend by Mutual Funds

10

7.5

 

 

 

194 O – TDS on payment to E-Commerce participant

1

0.75

 

Other Important Points in relation to TDS:

    • TDS on Salary under section 192, shall continue to apply at slab rates and there is no relaxation granted therein.
    • It has been clarified that there shall be no relaxation in case of payment made to Non- Residents and TDS shall continue to apply at specified rates.

 

    • Further, in case if a person does not have PAN and provisions of Section 206AA applies then in such cases rate of 20% shall continue to apply.

 

  • Extension of Due date for filing of Income Tax Return:
    • Due date for filing Income Tax return for FY 2019-2020 has been extended for all class of assessee’s to 30th November, 2020.
    • Further, the due date for filing various Audit reports have been extended from 30th September, 2020 to 31st October, 2020.
  • Extension of time for Opting under Vivad se Vishwas Scheme:
    • Date for opting for Vivad se Vishwas scheme has been extended from 30th June, 2020 to 31st December, 2020 without excess payment.
  • Extension of time for Completion of Scrutiny Assessment:
    • Time barring for Scrutiny Assessment Cases for AY 2018-19, was 30th September, 2020 which has now been extended to 31st December, 2020.
    • Further, time barring for scrutiny assessment cases for AY 2019-20, was 31st March, 2021 which has now been extended to 30th September 2021.

 

  • Govt changes definition of MSMEs, revises investment limit

Existing and Revised Definition of MSMEs are tabulated below: -

 

Existing MSME Classification

Criteria : Investment in Plant & machinery or Equipment

Classification

Micro

Small

Medium

Mfg. Enterprises

Investment<Rs. 25 Lac

Investment<Rs. 5 Cr.

Investment < Rs. 10 Cr.

Service Enterprise

Investment<Rs. 10 Lac

Investment<Rs. 2 Cr.

Investment < Rs. 5 Cr.

 

Revised MSME Classification

Composite Criteria : Investment and Annual Turnover

 

Manufacturing & Services

Investment < Rs. 1 Cr.

And Turnover < Rs. 5 Cr.

Investment<Rs. 10 Cr.

And Turnover < Rs. 50 Cr.

Investment < Rs. 20 Cr.

And Turnover < Rs. 100 Cr.

 

Our View:

Reduction in rates of TDS by 25%, is a welcome move especially with respect to Incomes where the rate of TDS was as high as 10%. This will ensure that assessee’s have liquidity and funds do not get block on account of TDS deduction. Further, extension of due dates for filing Income Tax returns in advance is good move, as after opening of lock-down people will be able to focus on business instead of Income Tax compliances. Further, extension in due date for Vivad se Vishwas will ensure that people have time for payment of Taxes to clear their past disputes.

 

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