I am an architect who runs his profession. In the course of business, I have to pay professional fees to other architects and interior decorators. The government recently announced a reduction in TDS rates by 25%. I wish to know what will be the rate of TDS for professional payments, and what is the threshold limit?
The usual TDS rate on professional payments made to architects is 10%. However, the stimulus package announced for COVID-19, the rate of TDS stands reduced to 7.5% for payments made until 31 March 2021. Do note that the lower TDS benefit is for professional fee dues from 14 May 2020 until 31 March 2020.
The threshold limit for the deduction of tax (TDS) continues to be the same at Rs 30,000. Hence, if the payments you make exceed Rs 30,000 in a financial year, you have to deduct tax. In a case your liability to TDS arises on or after 14 May 2020, TDS rate applicable is 7.5%.
I am a salaried employee. My monthly salary payment is liable to TDS. I understand that the government has recently announced a reduction in TDS rates. I wish to know whether there is a reduction in TDS on my salary payments? Also, I have fixed deposits with banks with annual interest receipt of Rs 50,000. Will there be a reduction in the TDS on interest receipts?
The government announced a reduction in TDS rates for specified payments such as interest, professional fee, contractual payments and others. However, the reduction in TDS rates does not apply to payments under salaries. Your salary income is liable to TDS as per the income tax slab rates. There is no alteration in the income tax slab rates as part of the stimulus package. Hence, the TDS on salary payments continues as per your income slabs either under the existing tax regime or new tax regime, as you may choose for FY 2020-21.
The reduction in TDS rate applies to interest payments by banks. Your interest income from bank FDs will be liable to lower TDS rate of 7.5% for interest credited on and after 14 May 2020 until 31 March 2021.
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I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.