What is the reduced latest TDS Rate Chart for FY 2020-21 (AY 2021-22)? What are the new TDS Rates after 14th May 2020 due to Government’s reduction in TDS Rates due to Corona Virus? What do you mean by TDS? What is the applicable TDS Rates for NRIs for FY 2020-21 (AY 2021-22)?
When we receive income through different ways like Salary, Dividend income from mutual funds or stocks, commission, rent, interest on Bank Fixed Deposits / Securities etc., the providers of this income like Bank or your employer deduct the tax before transferring you such income.
TDS or tax deducted at source is a process of collecting Income Tax at the source. It is a process of deducting the tax from the original source of income.
TDS is calculated and levied on the basis of a certain threshold limit, which is the maximum level of income after which TDS will be deducted from your future income/payments. It is deducted as per the Indian Income Tax Act, 1961.
As I told earlier, apart from salary income and Bank FD earning, there are many ways TDS is deducted like interest income from the post office, insurance commission, rent payment, early EPF withdrawals, the sale of immovable property, rent payments on property etc.,
Budget 2020 – Introduction of Sec.194K and TDS on Dividend Income in Mutual Fund
With the introduction of new Sec.194K, Mutual Fund Companies will deduct the TDS on your Dividend Income if your such Dividend Income is more than Rs.5,000 in a Financial Year.
There was a huge cry and confusion with respect to this section. However, later on CBDT came with clarification and mentioned that such TDS will be applicable for Dividend Options only.
Hence, any capital gain in mutual funds with respect to sale or transfer of mutual funds will not attract any TDS.
Note:-Avoiding TDS does not mean avoiding TAX. As DDT was abolished in the hands of the Mutual Fund Companies, the Dividend income will be taxable as per your tax slab. If your tax slab is 30% and TDS was done at 10%, then your tax liability will not end there. You have to pay the remaining 20% Tax.
However, if your tax slab is 10% and TDS was deducted on such dividend income, then you no need to pay any further tax.
Latest TDS Rate Chart for FY 2020-21 (AY 2021-22) – Effective from 14th May 2020
Now, let us see the complete Latest TDS Rate Chart for FY 2020-21 (AY 2021-22). Due to Corona Virus economic slowdown, on 13th May 2020, Government slashed 25% from the existing TDS Rates. I have provided both the rates for your better understanding.
Do remember that there is no change in TDS rates for salaried from 14th May 2020. Also, the reduction in TDS rates are not applicable to NRIs.
Latest TDS Rate Chart FY 2020-21 (AY 2021-22) for NRIs
When it comes to TDS, the rules changes to NRIs. Hence, let us discuss on this aspect separately.
# Interest earned on Non-Resident Ordinary Account (NRO) is taxable. TDS of 30% is applicable to it. But interest earned on Non-Resident External (NRE) accounts and Foreign Currency Non-Resident (FCNR) accounts is not taxed in India. Hence, there is no tax deducted at source on NRE and FCNR interest income.
# NRI Investments in Shares / Mutual Funds attract TDS and below are the TDS rate applicable on MF redemptions by NRIs for FY 2020-21.
Note:-STCG and LTCG along with applicable surcharge, and Health and Education Cess will be deducted at the time of redemption of units in case of NRIs
# Under Sec.195, when an NRI sells a property, the buyer is liable to deduct TDS @ 20% on Long Term Capital Gains. In case the property has been sold before 2 years (reduced from the date of purchase), a TDS of 30% shall be applicable (on Short Term Capital Gains).
Misconceptions about TDS (Tax Deducted at Source)
# Avoiding TDS does not mean avoiding Tax. You just avoid the deduction of tax. However, you have to pay the tax as per the applicable rules and tax rate even if you avoided TDS. For example, in case of FDs, one can give Form 15G or Form 15H and avoid TDS. But it does not mean that such FD interest income is tax free. You have to pay the tax on such interest as per applicable tax rates.
Hence, never rush to submit Form15G/H or any method just to avoid TDs.
# If you paid the TDS, then your tax liability does not end there itself. You have to file IT return and if anything more than TDS is payable, then you have to pay it.
# All are not eligible to submit the Form 15G or Form 15H. Because only those individuals are eligible to submit the Form 15G or Form 15H whose total taxable income is NIL and also and the total of the aggregate of your income for which form 15 G can be submitted should not exceed the basic exemption limit. But sadly neither individual care about such rules nor the Banks who accept the forms.
Hope this much information is enough for you to understand the Latest TDS Rate Chart FY 2020-21 (AY 2021-22).
Refer our other posts related to Budget 2020:-
- Mutual Fund Taxation FY 2020-21 (AY2021-22)
- Latest Income Tax Slab Rates FY 2020-21 (AY 2021-22)
- New Tax Regime – Complete list of exemptions and deductions not allowed
- Taxation on Side Pocketed or Segregated Mutual Funds
- Budget 2020 Highlights – 5 Changes you must know