Category: TDS & TCS

Luxury Items under the ambit of TCS – Income Tax

Posted on by Hatim Bharmal

TCS on  luxury goods: Know the Rates, Rules & Applicability w.e.f April 22, 2025:

The Tax Collected at Source (TCS) provisions under the Income Tax Act, 1961, play a crucial role in ensuring tax compliance and transparency in high-value transactions. As per Section 206C, certain sellers are mandated to collect a specified percentage of tax from buyers at the time of sale of specified goods or receipt of sale consideration, provided the transaction exceeds prescribed thresholds.

Amendment in the section 206C which specifies the transactions on which TCS is applicable:

  • Finance Act 2024 (No. 2) has amended the provisions of section 206 (1F) to expand the scope of applicability of TCS provision to include other goods under the ambit of TCS in addition to existing applicability on sale of Car for value exceeding 10 lakh rupees.
  • Vide notification no 36/2025/F. No. 370142/11/2025-TPL dated 22-04-2025 Central government has notifed the following goods of the value exceeding 10 lakh rupees for collection of tax at source at 1% :
Sr. No. Nature of goods
1 any wrist watch
2 any art piece such as antiques, painting, sculpture
3 any collectibles such as coin, stamp
4 any yacht, rowing boat, canoe, helicopter
5 any pair of sunglasses
6 any bag such as handbag, purse
7 any pair of shoes
8 any sportswear and equipment such as golf kit, ski-wear
9 any home theatre system
10 any horse for horse racing in race clubs and horse for polo
  • The above amendment affects the ultra High Net Worth Individuals and traders or distributers of the above mentioned goods as TCS @ 1% will be collected by trader or distributer in addition to amount of goods so as to track the high value transaction by the Income Tax department.

 

TCS on Goods and Services: The Basics

The table outlines two scenarios for TCS collection on goods and services  including the criteria, applicable rates, sections of the Income Tax Act, and who it applies to. Let’s dive into the details:
 
A. TCS on Specified Goods:
No. Description of Goods TCS Rate Important Points to be considered
1 Alcoholic Liquor for human consumption 1% – No TCS is collected if goods are procured for the purpose of manufacturing, processing or producing articles or things or for the purposes of generation of power.

-Srap means waste and scrap from the manufacture or mechanical working of materials which is not usable as such.

– Applicable to seller if its turnover from business exceeds 1 crore in previous year.
2 Tendu leaves 5%
3 Timber obtained under a forest lease 2%
4 Timber obtained by any mode other than under a forest lease 2%
5 Any other forest produces not being timber or tendu leaves 2%
6 Scrap 1%
7 Minerals, being coal or lignite or iron ore 1%
8 Motor Vehicle 1% -Applicable if value of Car exceeds 10 lakhs

-Not applicable in case of sale of goods by Manufacturer to distributor
9 Luxury Goods – as mentioned in above para of article 1%

*Note – Applicability of TCS on sale of goods other than mentioned above for more than 50lakh during the year as mentioned  u/s. 206(1H)  has been omitted w.e.f. 1st April 2025.

 

B. TCS on specified services
Sr. No. Description of Service TCS Rate Important points to be considered
1. Remittance by Authorised dealer under LRS Scheme for medical and educational purpose 5% -Applicable if remittance amount exceeds 10 lakhs during the financial year.

 

-No TCS on remittance if loan is taken for educational purpose.

 
2. Remittance by Authorised dealer under LRS Scheme for other purpose 20% -Applicable if remittance amount exceeds 10 lakhs during the financial year.

 
3. Seller of Overseas Tour programme package

5%

20%

 If overseas tour package in less than 10 lakh – 5%

– If overseas tour package exceeds 10 lakh – 20%

 
4. Service of Granting right or lease or license in any parking lot or toll plaza or mine or quarry to any person other than PSU 2% -mining and quarrying shall not include mining and quarrying of mineral oil (petroleum and natural gas)

 

Compliances Required for TCS Provisions

• Collect TCS at the Prescribed Time – TCS must be collected at the earlier of debiting the buyer’s account or receipt of payment.

• Timely Deposit of TCS – TCS collected must be deposited with the government by the 7th day of the following month (or by 30th April for collections in March)

• File Quarterly Returns – Sellers are required to file quarterly TCS returns using Form 27EQ within the specified deadlines (15th day of the following Quarterly (or by 15th May for Jan-March Quarter).

•Issue TCS Certificates – After filing returns, a TCS certificate (Form 27D) must be issued to the buyer within 15 days from filling of TCS Return, serving as proof for the buyer to claim tax credit.

Consequences for Not Collecting TCS under the Income Tax Act

• Penalty under Section 271CA – If a seller fails to collect TCS, a penalty equal to the amount of tax not collected may be imposed by the Joint Commissioner. However, if the seller can prove there was a reasonable cause for the failure, the penalty may be waived under Section 273B.

• Interest Liability – In addition to penalties, interest at 1% per month or part thereof is charged from the date the tax was collectible until it is actually collected and deposited with the government.

• Additional Penalties – Non-deposit or delayed deposit of TCS, as well as late filing of TCS returns, can attract further penalties and fines, including ₹100 per day for delayed return filing.

Conclusion

TCS provisions under the Income Tax Act, 1961, play a vital role in widening the tax base and promoting transparency in high-value transactions. Understanding the applicability, adhering to the prescribed compliances, and being aware of the consequences of non-compliance are essential for every business and professional dealing in specified goods and services. Timely collection, deposit, and reporting of TCS not only ensure legal compliance but also help avoid hefty penalties and interest liabilities.

By staying informed and proactive, you can ensure smooth transactions while fulfilling your tax responsibilities. Have questions about TCS Provisions? Drop them in the comments below, and let’s discuss!

Check out TCS Section 206C of the Income Tax Act, 1961.

Disclaimer:

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

TDS on House Rent Payments: Know the Rates, Rules & Applicability

Posted on by CA Meet Dhrangadhariya

TDS on House Rent Payments: Know the Rates, Rules & Applicability w.e.f April 1, 2025:

Tax Deducted at Source (TDS) is a mechanism in India where tax is deducted at the source of income, ensuring that the government collects tax on income as it is earned. When it comes to house rent, specific TDS rules apply under the Income Tax Act, particularly for individuals, Hindu Undivided Family (HUF), companies, and firms. In this blog, we’ll break down the TDS rates and criteria for house rent for Financial Year 2025-26, as outlined in the table below, helping you understand your obligations as a tenant or landlord.




TDS on House Rent: The Basics


The table outlines two key scenarios for TDS deduction on house rent, including the criteria, applicable rates, sections of the Income Tax Act, and who it applies to. Let’s dive into the details:




A. TDS on Rent Paid to a Resident Indians:












No.
House Rent Criteria
TDS Rate
Section
Tenant Applicability




1
Rent is more than ₹2.40 lacs per annum
10%
194-I
– Company


– Firm


– Individual/HUF with business turnover more than ₹1 crore


– Individual/HUF with professional gross receipts more than ₹50 lacs





2
Rent is more than ₹50,000 per month
2%
194-IB
– Individual/HUF with business turnover less than ₹1 crore


– Individual/HUF with professional gross receipts less than ₹50 lacs











Scenario 1: Rent Exceeding ₹2.40 Lacs Per Annum


• Criteria: If the annual rent paid exceeds ₹2,40,000, TDS must be deducted.


• TDS Rate: The applicable TDS rate is 10%.


• Section: This falls under Section 194-I of the Income Tax Act, which deals with TDS on rent payments.




• Applicability: This rule applies to:


a) Companies and firms, regardless of their income.


b) Individuals or HUFs who have a business turnover exceeding ₹1 crore in a financial year.


c) Individuals or HUFs with professional gross receipts exceeding ₹50 lacs in a financial year.




• Example: Suppose a company rents office space and pays ₹3,00,000 annually. Since the rent exceeds ₹2.40 lacs, the company must deduct 10% TDS, which amounts to ₹30,000, and pay the remaining ₹2,70,000 to the landlord. The deducted TDS must be deposited to the government, and the landlord can claim credit for this amount while filing their income tax return.




Scenario 2: Rent Exceeding ₹50,000 Per Month


• Criteria: If the monthly rent exceeds ₹50,000, TDS is applicable.


• TDS Rate: The TDS rate in this case is 2%.


• Section: This is covered under Section 194-IB of the Income Tax Act.




• Applicability: This rule applies to:


a) Individuals or HUFs with business turnover less than ₹1 crore.


b) Individuals or HUFs with professional gross receipts less than ₹50 lacs.




• Example: An individual pays ₹60,000 per month as rent for their apartment, totaling ₹7,20,000 annually. Since the monthly rent exceeds ₹50,000, they must deduct 2% TDS, which is ₹1,200 per month (₹14,400 annually). The remaining ₹58,800 is paid to the landlord each month. The tenant must deposit the TDS to the government and issue a TDS certificate (Form 16C) to the landlord.




Key Points to Understand


1) Threshold Limits: The ₹2.40 lacs per annum threshold (Section 194-I) is an annual limit, while the ₹50,000 per month threshold (Section 194-IB) is a monthly limit. Ensure you calculate the rent correctly to determine which section applies.


2) Who Deducts TDS? Under Section 194-I, companies, firms, and high-income individuals/HUFs are responsible for deducting TDS. Under Section 194-IB, individuals/HUFs with lower incomes (below the specified thresholds) are responsible, making it easier for the government to track rent payments by smaller taxpayers.


3) TDS Deposit and Compliance: The deducted TDS must be deposited to the government by the 7th of the following month (or by April 30th for TDS deducted in March). Additionally, tenants must issue TDS certificates to landlords—Form 16A for Section 194-I and Form 16C for Section 194-IB.


4) No TAN Requirement for Section 194-IB: Unlike Section 194-I, where a Tax Deduction Account Number (TAN) is required to deduct and deposit TDS, individuals under Section 194-IB can use their PAN to deduct and deposit TDS, simplifying the process for smaller taxpayers.




B. TDS on Rent Paid to Non-Resident Indians (NRIs)


When remitting rental payments to a Non-Resident Indian (NRI), Tax Deducted at Source (TDS) must be withheld at a rate of 30%, in addition to the applicable surcharge and a 4% cess. This TDS deduction is mandatory regardless of the rental amount, as there is no prescribed threshold for rent payments to NRIs. However, an NRI may apply for a certificate of nil or reduced TDS deduction if their taxable income in India falls below the basic exemption limit, subject to the provisions of the Income Tax Act.


What Happens If You Miss TDS?




TDS on house rent ensures that rental income is taxed at the source, reducing tax evasion. For tenants, deducting TDS is a legal obligation, and non-compliance can lead to penalties. For landlords, the TDS deducted can be claimed as a credit when filing their income tax returns, ensuring they aren’t taxed twice on the same income.


• Penalties: Non-deduction or late deduction may attract interest (1% per month) and fines equal to the TDS amount.

• Disallowance of Expenses: The rent paid may not be deductible as a business expense for the tenant.


Practical Tips for Tenants and Landlords


    

  • 

    Tenants: Always check the rent amount and your income status to determine if TDS applies. Use online tools or consult a tax professional to calculate and deposit TDS correctly. Keep records of rent payments and TDS certificates issued.
    

    • 

  • 

    Landlords: Ensure your tenants are aware of their TDS obligations. Provide your PAN to the tenant for TDS deduction and verify that the TDS amount is credited to your account when filing your returns.
    

    • 



Conclusion


Understanding TDS on house rent is crucial for both tenants and landlords in India. Whether you’re a company paying high rent or an individual renting a modest apartment, knowing the applicable TDS rates and sections can help you stay compliant with tax laws. The table above provides a clear snapshot of the rules, but if you’re unsure about your specific situation, it’s always a good idea to consult a tax expert.


By staying informed and proactive, you can ensure smooth rent transactions while fulfilling your tax responsibilities. Have questions about TDS on rent? Drop them in the comments below, and let’s discuss!




Check out TDS Section 194-I & 194I-B of the Income Tax Act, 1961.




Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.





		
		
	


	





	

		
Understanding Income Tax Deduction from Salaries for FY 2024-25: Key Updates for Employers and Employees
			

				Posted on  by CA Meet Dhrangadhariya			

			


	
			

			
	

		
Understanding Income Tax Deduction from Salaries for FY 2024-25: Key Updates for Employers and Employees


The Central Board of Direct Taxes (CBDT) has issued Circular No. 3/2025, dated February 20, 2025, outlining the guidelines for income tax deduction from salaries under Section 192 of the Income-tax Act, 1961, for the Financial Year 2024-25. This circular provides clarity on the latest amendments introduced through the Finance (No.2) Act, 2024, Finance (No.1) Act, 2024, and the Finance Act, 2023. Here’s a detailed breakdown of the key updates affecting salaried individuals and their employers.


Definition of Salary and Perquisites


    

  1. Expanded Salary Definition: Salary now includes contributions made by the Central Government to the Agniveer Corpus Fund under the Agnipath Scheme (Section 80CCH).
    2. 

  2. Perquisites Inclusion: The definition of perquisites now encompasses rent-free accommodations and accommodations provided at a concessional rate by employers.
    3. 



Revised Tax Rates Under the Old and New Regimes


Surcharge Rates (Old Tax Regime)


    

  • 10% on income between ₹50 lakh – ₹1 crore
    • 

  • 15% on income between ₹1 crore – ₹2 crore
    • 

  • 25% on income between ₹2 crore – ₹5 crore (excluding dividend income and capital gains under Sections 111A, 112, 112A)
    • 

  • 37% on income above ₹5 crore (excluding dividend income and capital gains under Sections 111A, 112, 112A)
    • 

  • 15% on income above ₹2 crore (including dividend income and capital gains under Sections 111A, 112, 112A)
    • 



Tax Slabs Under the New Tax Regime (Section 115BAC)


    

  • ₹0 – ₹3,00,000 – Nil
    • 

  • ₹3,00,001 – ₹7,00,000 – 5%
    • 

  • ₹7,00,001 – ₹10,00,000 – 10%
    • 

  • ₹10,00,001 – ₹12,00,000 – 15%
    • 

  • ₹12,00,001 – ₹15,00,000 – 20%
    • 

  • Above ₹15,00,000 – 30%
    • 



Additional Key Amendments


    

  1. Form No. 16 & 24Q Updates:

      

    • The Health and Education Cess has replaced the Education Cess.
      • 

    • New provisions added to Form No. 24Q, including a dedicated field for other tax deducted or collected at source.
      • 

    

    2. 

  2. Leave Encashment Exemption Increased:

      

    • The exemption limit for leave encashment for non-government employees has been raised to ₹25 lakh.
      • 

    

    3. 

  3. Agniveer Corpus Fund Tax Exemption:

      

    • Payments from the Agniveer Corpus Fund under the Agnipath Scheme are fully tax-exempt.
      • 

    

    4. 

  4. Rebate Under Section 87A:

      

    • For those opting for the new tax regime, total income up to ₹7 lakh qualifies for a rebate, ensuring zero tax liability.
      • 

    

    5. 

  5. Penalty & Prosecution for TDS Defaults:

      

    • Penalty under Section 271C: Failure to deduct/pay TDS can result in a penalty equal to the tax not deducted.
      • 

    • Prosecution under Section 276B: Non-payment of deducted TDS can attract imprisonment of 3 months to 7 years.
      • 

    

    6. 



Employer Responsibilities


Employers must ensure:


    

  • Accurate TDS deductions based on employees’ selected tax regimes.
    • 

  • Compliance with the revised Form 16 & 24Q formats.
    • 

  • Prompt deposit of deducted taxes to avoid penalties.
    • 

  • Timely issuance of Form 16 to employees.
    • 



Conclusion


With these new amendments, employees should evaluate which tax regime suits them best. Employers, on the other hand, must align their payroll and tax deduction processes with these updates to ensure compliance and avoid penalties. For further details, refer to the official circular here.


For expert tax planning and compliance guidance, consult a Chartered Accountant today!


Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.



		
		
	


	





	

		
New Income Tax Bill 2025: Key Insights and Expectations
			

				Posted on  by CA Meet Dhrangadhariya			

			


	
			

			
	

		
The Indian government is set to introduce a new Income Tax Bill in Parliament, with a focus on overhauling the current Income Tax Act of 1961. This move comes as part of an effort to simplify the tax framework, which has grown increasingly complex over the past six decades. The existing Act, with its 298 sections, has undergone continuous modifications, particularly through annual amendments in the Union Budget. These changes, which range from adjustments to tax rates to the introduction and removal of exemptions, have made the Income Tax Act far more intricate than its original version.


Given the extensive revisions over time, the Act no longer reflects the straightforward intentions of the 1961 legislation. In response, tax professionals and taxpayers have long advocated for a comprehensive overhaul—a new, streamlined law that incorporates existing provisions while addressing modern-day needs. After careful deliberation, the Union Cabinet approved the new bill on February 8, 2025, and it is expected to be presented in Parliament by February 10, 2025.


Budget 2025 and the New Bill


Following the announcement in the 2025 Union Budget, the Cabinet has endorsed the new Income Tax Bill, signaling that it will be tabled in Parliament during the current session, likely by February 13, 2025. Key highlights of the bill include a proposed reduction in the number of sections by approximately 30%, which will significantly cut down the length of the Act by nearly half. Despite these changes, there will be no adjustments to the income tax slab rates outlined in the 2025 Budget.


Purpose of the New Income Tax Bill


In her Budget speech for 2024, Finance Minister Nirmala Sitharaman announced the government’s intention to undertake a comprehensive review of the Income Tax Act of 1961. The objective was clear: to make the Act more concise and accessible, ensuring taxpayers can easily understand their obligations.


A central aim of this revision is to reduce disputes and litigation, promoting a system that offers more clarity and certainty. The government has also emphasized the importance of compliance simplicity, making the tax process more transparent and less burdensome for individuals and businesses alike.


As part of the reform process, the Income Tax Department initiated a public consultation period, encouraging taxpayers to provide feedback and suggest changes they would like to see in the new law. This inclusive approach reflects the government’s commitment to taking public input into account while shaping tax reforms.


In her address during the 2025 Budget, the Finance Minister reaffirmed the government’s dedication to reforming tax law, aligning the new bill with the principles of fairness and justice, similar to the goals outlined in the recently enacted Bharatiya Nyaya Sanhita, which repealed the Indian Penal Code of 1860 in July 2024.


Key Changes in the New Income Tax Bill


The new Income Tax Bill is expected to significantly simplify the existing tax structure and reduce the number of provisions currently in place. The aim is to make the law more digestible for both taxpayers and tax authorities, thereby increasing compliance and reducing litigation. Some of the key changes expected include:


    

  • Simplified Residence Rules: The rules for determining the residential status of individuals are expected to be made more straightforward, offering clearer guidance.
    • 

  • Streamlined Tax Structure: The new bill will drastically reduce the number of provisions from the current Act, making it more concise and user-friendly.
    • 

  • Easier Compliance: The bill is designed to simplify the process of compliance for taxpayers, cutting down on the administrative burden for both individuals and businesses.
    • 



Expected Benefits of the New Income Tax Bill


    

  1. Reduction in Complexity: By eliminating many of the current exemptions and deductions, the new bill is expected to significantly simplify the tax code, making it easier to navigate for both individuals and businesses.
    2. 

  2. Improved Compliance: A more transparent and straightforward tax system will help reduce confusion, encouraging greater adherence to tax obligations across the board.
    3. 

  3. Rationalized Tax Rates: The simplification of tax rates is expected to bring India’s tax system closer in line with global standards, potentially making the country a more attractive destination for both domestic and international businesses.
    4. 

  4. Decreased Legal Disputes: By clarifying tax laws and reducing ambiguities, the new bill is expected to minimize the frequency of disputes between taxpayers and the tax authorities, fostering a more harmonious and efficient tax environment.
    5. 



 


Conclusion


The introduction of the New Income Tax Bill in 2025 marks a significant step toward modernizing India’s tax system. With an emphasis on simplicity, transparency, and fairness, the new bill aims to enhance the ease of doing business in India and streamline the tax compliance process. As the government moves forward with this transformative reform, both taxpayers and tax professionals will benefit from a more predictable, less contentious tax environment. The proposed changes are set to make India’s tax laws more aligned with global best practices while reducing the administrative burdens that currently exist under the outdated provisions of the 1961 Act.


Download: Draft Income Tax Bill 2025.


Refer our latest blog related to Income Tax Bill 2025 by clicking here


Disclaimer:


This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.