The Finance Bill highlights a number of important initiatives proposed in the Union Budget 2024, with a focus on reforms in Tax on Deductions at Source (TDS) and Securities Transaction Tax (STT), these changes are set to take effect on October 1, 2024. Here is a detailed overview of the major changes:

1. Reduction in TDS Rates Across Several Sections

Several TDS rates have been reduced to provide relief across a range of financial transactions. The adjustments apply to the following sections:

  • Section 19DA, 194H, 194-IB, and 194M: Payments under these sections will now have a 2% TDS rate, down from the previous 5%. This is expected to facilitate access to finance for individuals and businesses.
  • Section 194DA (Life Insurance Policy Payouts): The TDS rate on payouts from life insurance policies has also been reduced from 5% to 2%, benefiting the policyholders and reducing the tax on their income as they get it on.
  • Section 194G (Commission on Lottery Ticket Sales): Lottery agents and distributors will now see a lower TDS of 2% on commissions and fees, a substantial drop from the earlier 5%.

2. TDS for E-Commerce Operators

E-commerce operators also benefit from a significant rate reduction:

  • The TDS rate applicable to e-commerce operators has been lowered from 1% to 0.1%. This amendment aims to support the growth of online businesses by reducing the administrative burden associated with taxation.

3. TDS on Sale of Immovable Property (Section 194-IA)

Real estate transactions are set to experience further clarity:

  • Under Section 194-IA, a 1% TDS is to be deducted on income from sale of immovable property worth more than ₹50 lakh. Further research makes it clear that this rule collectively in transactions involving multiple buyers or sellers.

4. Increase in Securities Transaction Tax (STT)

Investors dealing in futures and options (F&O) and other securities should prepare for an increased tax rate:

  • The securities transaction tax (STT) on Futures and options (F&O) trading will increase beginning October 1. The STT on futures trading will rise from 0.0125% to 0.02%, while the STT on options trading will increase to 0.1%.

Stay informed, stay compliant!

Author: Diksha Agarwal and Akhil Agarwal, Chartered accountant