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The Indian government has announced significant revisions to Tax Deducted at Source (TDS) rates and other tax rules, effective from October 1, 2024. These changes, outlined in the Union Budget 2024 and ratified in the Finance Bill, aim to streamline tax collection and impact various financial transactions.
Among the notable changes, the TDS rate for payments under sections 19DA, 194H, 194-IB, and 194M has been reduced from 5% to 2%. This reduction extends to payments made in respect of life insurance policies, commission on lottery ticket sales, rent payments by individuals or Hindu undivided families, and certain other sums paid by individuals or Hindu undivided families. Additionally, the TDS rate for e-commerce operators has been significantly lowered from 1% to 0.1%, applicable to payments made to e-commerce participants.
The revised tax rules also introduce new measures for government bonds, share buybacks, and real estate transactions. Starting from October 1, 2024, a 10% TDS will be deducted from specified central and state government bonds, including floating rate bonds, exceeding a threshold of Rs 10,000. Moreover, share buybacks will now be subject to shareholder-level taxes, similar to dividends, resulting in a higher tax burden for investors. The shareholder's acquisition costs of these shares will be considered when calculating capital gains or losses. Furthermore, the 2024 budget has increased the Securities Transaction Tax (STT) on Futures & Options (F&O) of securities to 0.02 percent and 0.1 percent, respectively.
The new budget also clarifies the TDS regulations for real estate transactions. Section 194-IA mandates a 1% TDS on payments for the sale of immovable property exceeding Rs 50 lakh. The amendment clarifies that this rule applies collectively in transactions involving multiple buyers or sellers. These changes are set to come into effect on October 1, 2024, impacting both individuals and businesses engaging in various financial activities.