Amendments in Chapter XVII-B and XVII-BB by the Finance (No.2) Act, 2024

1. Key Amendments in Tax Deducted at Source (TDS) Provisions

TDS on Salary [Section 192]

Section 192(2B) enables a taxpayer to furnish details of income under other heads and TDS thereon to their employer to be considered while deducting tax under section 192. Previously, there was no explicit provision to consider TCS in the hands of employees for salary TDS computation. To reduce the compliance burden of claiming TCS refunds and ease cash flow issues, section 192(2B) has been substituted effective 01.10.2024 to permit consideration of both TDS and TCS for deducting tax under section 192(1).

Interest on Securities [Section 193]

Effective 01.10.2024, TDS under section 193 is attracted on interest payable on Floating Rate Savings Bonds, 2020 (Taxable) and any other notified Central/State Government security if the interest payable during the financial year exceeds ₹10,000.

Payments to Contractors [Section 194C] vs. Professional Services [Section 194J]

Explanation (iv) to section 194C has been amended effective 01.10.2024 to give statutory effect to CBDT Circular No. 720 (30.08.1995). It expressly clarifies that any sum referred to in section 194J(1) (fees for professional/technical services) will not constitute "work" for tax deduction under section 194C.

TDS Rate Reductions effective 01.10.2024

• Life Insurance Policy Payments [Section 194DA]: Rate reduced from 5% to 2%.
• Lottery Ticket Commission/Remuneration [Section 194G]: Rate reduced from 5% to 2%.
• Commission or Brokerage [Section 194H]: Rate reduced from 5% to 2%.
• Rent Payment by Certain Individuals or HUF [Section 194-IB]: Rate reduced from 5% to 2%.
• Payment of Certain Sums by Certain Individuals/HUF [Section 194M]: Rate reduced from 5% to 2%.
• E-commerce Operator to E-commerce Participant [Section 194O]: Rate lowered from 1% to 0.1% to bring parity with offline transaction TDS/TCS provisions.

Omission of Section 194F

Section 194F (TDS @ 20% on repurchase of units by Mutual Funds/UTI under ELSS Section 80CCB) has been omitted effective 01.10.2024 as most ELSS schemes under 80CCB have been redeemed or withdrawn.

Payment on Transfer of Immovable Property [Section 194-IA]

Effective 01.10.2024, a proviso has been inserted to clarify that where there are multiple transferors or transferees for an immovable property, the threshold limit of ₹50 lakh applies to the aggregate consideration/stamp duty value paid or payable by all transferees to all transferors.

New Section: Payments to Partners of Firms [Section 194T]

Inserted effective 01.04.2025, requiring partnership firms to deduct TDS @ 10% on payments or credits by way of salary, remuneration, interest, bonus, or commission to partners, if the aggregate sum exceeds ₹20,000 in a financial year. This aims to lower the advance tax burden on partners.

LTCG TDS Rates for Offshore Funds & Foreign Bonds [Sections 196B & 196C]

TDS on long-term capital gains under sections 196B and 196C increased from 10% to 12.5% for transactions executed on or after 23.07.2024.

Lower TDS Certificate [Section 197]

Section 197(1) substituted effective 01.10.2024 to bring purchase of goods under section 194Q within the ambit of lower/nil TDS certificates.

2. Summary of Revised TDS Rates (Chapter XVII-B)

3. Administrative & Compliance Amendments

Foreign Taxes Withheld deemed as Income Received [Section 198]

Amended effective 01.04.2025 to explicitly deem taxes withheld outside India (where tax credit is claimed) as income received in India, preventing double deduction claims.

Time Limit for Correction Statements [Sections 200(3) & 206C(3B)]

A maximum time limit of 6 years from the end of the relevant financial year has been introduced effective 01.04.2025 for submitting correction statements for TDS/TCS.

Processing Statements from Non-Deductors [Section 200A]

Amended effective 01.04.2025 empowering CBDT to make schemes for processing statements submitted by non-deductors, such as Form 26QF filed by Virtual Digital Asset (VDA) Exchanges u/s 194S.

Time Limit for Orders treating Assessee in Default [Sections 201(3) & 206C(7A)]

Substituted effective 01.04.2025. The time limit for passing an order treating a person as an assessee-in-default is later of:

• 6 years (reduced from 7 years) from the end of the financial year in which payment/credit occurred; or
• 2 years from the end of the financial year in which the correction statement is delivered.

4. Tax Collection at Source (TCS) Provisions [Section 206C]

• Section 206C(1F): Expanded w.e.f. 01.01.2025 to cover sale of other notified luxury goods exceeding ₹10 lakh in value, in addition to motor vehicles.
• Section 206C(4): Credit for TCS can be granted to other eligible persons in accordance with rules w.e.f. 01.01.2025.
• Section 206C(7): Interest rate for delayed payment of collected TCS increased from 1% to 1.5% per month or part thereof w.e.f. 01.04.2025.
• Section 206C(9): Scope of lower TCS certificate expanded to include section 206C(1H) w.e.f. 01.10.2024.
• Section 206C(12): New sub-section inserted w.e.f. 01.10.2024 allowing nil/lower TCS for specified transactions or notified entities.

5. Prosecution Relaxation [Section 276B]

A new proviso inserted effective 01.10.2024 provides that prosecution provisions under Section 276B will not apply if the deducted TDS is remitted to the Central Government on or before the due date prescribed for filing the quarterly statement under Section 200(3).

Conclusion

The amendments in Chapter XVII-B and XVII-BB aim to enhance the ease of doing business, reduce cash-flow burdens, track high-value transactions, streamline deductor compliance, and reduce unnecessary litigation.