Finance Minister Nirmala Sitharaman has announced significant changes to the Tax Deducted at Source (TDS) framework that will impact salaried individuals. These modifications are set to increase disposable income and simplify tax processes. Nirmala Sitharaman stated, “A beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions, and capital gains taxation.”
Section 192 of the Income Tax Act, which governs TDS on salary income, will be amended to include all TCS paid and TDS deducted under other sections. This change, effective from October 1, 2024, is expected to put more money in the hands of salaried employees.
Previously, there was ambiguity regarding the deduction of tax on the sale of immovable properties (excluding agricultural land) when multiple buyers or sellers were involved, and the sale value exceeded ₹50 lakh. The Finance Bill clarifies that the exemption applies only when the total sale value is less than ₹50 lakh, irrespective of the number of buyers or sellers.
Additionally, the Finance Bill proposes a reduction in the TDS rate on rent payments. Currently, individuals or Hindu undivided families paying monthly rent exceeding ₹50,000 must deduct TDS at a rate of 5 percent. The proposed amendment reduces this rate to 2 percent.
Furthermore, the Budget addresses the issue of Tax Collected at Source (TCS) credited in a minor’s name. Previously, TCS could only be claimed in the minor’s name. Now, the adjustment of TCS credits in the minor’s name with the parent’s tax liability is allowed, provided the minor’s income is clubbed with that of the parent.
These changes are part of a broader effort to streamline tax processes and provide financial relief to taxpayers. The amendments are expected to take effect from October 1, 2024.