All you need to know about new TDS norms from July 1

Representational image only. File  

The Finance Act 2021 amended rules relating to tax deducted at source come into effect from July 1. These rules mandate tax deduction or tax collection at a higher rate in case the income tax returns are not filed by certain specified persons. Here is all that you need to know.

What is Tax Deducted at Source (TDS)? Why is it deducted?

Normally, the obligation to pay tax rests with the person who earns the income. TDS puts the onus on the person paying the amount to deduct tax on behalf of the person receiving the payment. TDS plays a key role in checking malpractices such as non-disclosure of incomes.

What are the transactions that attract TDS?

These include monthly salary payments, dividend income exceeding ₹5,000, interest earned on fixed deposits, rent exceeding ₹50,000 a month, sale of land/building exceeding ₹50 lakh, contract payments above ₹30,000 and professional and technical services fee exceeding ₹30,000.

What are the existing rates of TDS?

It differs for each category. For instance, TDS on dividends is 10%. TDS on payments to contractors or professional services varies from 1-10%, sale of immovable property attracts 1% TDS on the sale consideration and for rent, the applicable TDS is 5%.

What is the change from July 1 on TDS?

New provisions introduced in the Union budget 2021-22 come into effect from July 1. Abhishek Murali, Chairman, Direct Taxes Committee, Southern India Regional Council of Institute of Chartered Accountants of India, said as per the new provision the tax deductor/collector is required to check if the income earner has filed the returns for the previous two years if the amount of TDS deducted is ₹50,000 or more.

The new income tax portal has provided the facility to check by entering the PAN numbers. If the returns have not been filed, then the TDS deducted will be double the existing TDS rate or at rate of 5%, whichever is higher.

Does the new TDS norm apply to all categories?

No. Salary income, provident fund payments, TDS on lottery and horse racing have been excluded.

Since it kicks in from July 1, returns of which year would be checked?

Mr. Murali explains that since the norms are effective from July 1, the previous financial years of 2018-19 and 2019-20 will be considered for checking the return filing for the transactions in current financial year 2021-22.

As a taxpayer, why should I be concerned about these new TDS norms?

Mr. Murali says the new provision will play a key role in making society more tax compliant and will also facilitate businesses in checking the compliance in a very easy manner. Hence, taxpayers are advised to regularly file the return of income every year to avoid extra tax through the increased rates of TDS in the new provisions.

Our code of editorial values

This article is closed for comments.
Please Email the Editor

Printable version | Aug 4, 2021 8:25:27 AM |

Next Story