Reduction in rate of Tax Deduction at Source (TDS) and Tax Collection at Source

On 13th May, 2020 the Ministry of Finance issued circular in order to provide more funds at the disposal of the taxpayers for dealing with the economic situation arising out of COVID-19 pandemic, the rates of TDS for the following non-salaried specified payments made to residents reduced by 25% for the period from 14th May, 2020 to 31st March, 2021 are as follows:

S.No.Section of the Income Tax ActNature of PaymentExisting rate of TDSReduced rate from 14/05/2020 to 31/03/2021
1193Interest on Securities10%7.5%
3194AInterest other than interest on securities10%7.5%
4194CPayment of contractors and sub-contractors1% (individual/HUF) 2%  (others)0.75% (individual/HUF) 1.5% (others)
5194DInsurance Commission5%3.75%
6194DAPayment in respect of life insurance policy5%3.75%
7194EEPayment I respect of deposits under national Savings scheme10%7.5%
8194FPayment on account of re-purchase of Units by Mutual Funds or UTI20%15%
9194GCommission prize etc on sale of lottery tickets5%3.75%
10194HCommission or brokerage5%3.75%
11194-I(a)Rent for plant and machinery2%1.5%
12194-I(b)Rent for immovable property10%7.5%
13194-IAPayment for acquisition of immovable property1%0.75%
14194-IBPayment of rent by individual or HUF5%3.75%
15194-ICPayment for Joint development Agreements10%7.5%
16194JFee for professional or technical Services (FTS),Royalty, etc.2% (FTS, certain royalties, call centre) 10% (others)1.5% (FTS, certain royalties, call centre) 7.5% (others)
17194KPayment of dividend by mutual funds10%7.5%
18194LAPayment of compensation on acquisition of immovable property10%7.5%
19194LBA(1)Payment of income by business trust10%7.5%
20194LBB(i)Payment of income by investment fund10%7.5%
21194LBC(1)Income by securitisation trust25% (individuals/HUF) 30% (others)18.75% (individual/HUF) 22.5% (others)
22194MPayment to commission, brokerage etc. by individual and HUF5%3.75%
23194-OTDS on e-commerce participants1% (w.e.f.1.10.2020)0.75%

The rate of TCS has also been reduced by 25% for the period from 14th May, 2020 to 31st March, 2021:

S.No.Section of the Income tax ActNature of ReceiptsExisting rate of TCSReduced rate from 15/05/2020 to 31/03/2021
1206C(1)Sale of  
(a) Tendu leaves5%3.75%
(b) Timber obtained under a forest lease2.5%1.875%
(c) Timber obtained by any other mode2.5%1.875%
(d) Any other forest produce not being timber/ tendu leaves2.5%1.875%
(e) scrap1%0.75%
(f) Minerals, being coal or lignite or iron ore1%0.75%
2206C(1C)Grant of license, lease, etc of  
(a) Parking lot2%1.5%
(b) Toll Plaza2%1.5%
(c) Mining and quarrying2%0.75%
3206C(1F)Sale of motor vehicle above 10 lakhs1%0.75%
4206C(1H)Sale of any other goods0.1% (w.e.f. 01.10.2020)0.75%

Therefore, TDS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table in para 1 above. Similarly, the tax on the amount received or debited during the period from 14th May, 2020  to 31st March, 2021 shall be collected at the reduced rates specified in the table in para 2 above.

It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.  For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.


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