TDS/TCS Amendments in Income Tax laws

The Union Budget of India for the year 2023-24 (the Budget) has introduced various circumstances in which taxes are to be withheld  / collected by the payer.   Several taxpayers / citizens have approached us to understand the import and application of these amendments from time to time post the Budget speech.  This post seeks to provide an explanation to  such queries.

Tax Collection at Source Amendments

TCS rates on remittances made from India

Effective 1 July 2023, TCS would be required to be effected at the rate of 20% as against the existing rate of 5% for remittances under Liberalised Remittance Scheme (LRS) and overseas tour package. However, the TCS rate on remittances made for medical and education purposes in excess of INR 7 lakh continues to be at 5%. Further, in case remittance in excess of INR 7 lakh is made for educational purpose out of loan obtained from financial institution, the TCS rate of 0.5% remains unchanged.

Tax Deduction at Source (TDS) Amendments:

Benefit of tax treaty rate extended to specified income earned by non-residents

A non-residents in India when earning income from mutual fund units suffers a deduction of tax at source by the payer at the rate of 20%. From 1 April 2023, should the non-resident provide a Tax Residency Certificate to the payer, then the payer may discharge the TDS at the treaty rate.

Tax to be deducted on interest on specified securities

From  1 April 2023,  tax would be deducted on the interest payable on listed securities in dematerialized form.

Income from online Gaming.

From 1 July 2023 a payer needs to deduct tax at the rate of 30% on the ‘net winnings’ in the user account at the end of the Financial Year (FY) or at the time of withdrawal by the user. The method for computing the net winnings is yet to be prescribed.

It appears that treaty benefit for non-residents would not be available and the entire net winnings would be liable for tax deduction.

Clarification for tax deductibility on benefits/ perquisites

It has been clarified that the tax is to be deducted whether the benefit or perquisite is in cash or in kind or partly in cash and partly in kind.