Page 27 - Union Budget_2019
P. 27
Union Budget 2019
5.5 TDS on non-exempt portion of life insurance pay-out on net basis
Under Section 194DA, a person is required to deduct TDS at the rate of 1%, if it pays any sum to a resident
under a life insurance policy, which is not exempt under Section 10(10D). The deduction is on the gross
amount being paid to the resident.
It is proposed to provide for TDS at the rate of 5% on income component of the sum paid by the person i.e.
after deducting the amount of insurance premium paid by recipient from the total sum received.
This amendment shall be effective from 1st September, 2019.
The proposed amendment removes difficulties faced by assessees where TDS was deducted based on
gross amount and they had to pay income-tax on net income.
From the point of view of legislation, it would now be easier to match the income amount with the TDS
return of deductor vis-à-vis the return filed by the assessee.
5.6 TDS on payment by Individual/HUF to contractors and professionals
In furtherance to the objective of expanding the tax base and to plug a possible option for tax evasion,
Section 194M is proposed for deduction of TDS which is as follows:
• levy of TDS at the rate of 5%
• on the sum, or the aggregate of sums, paid or credited in a year
• to resident on account of contractual work or professional fees
• by an individual or HUF not required to deduct tax at source under section 194C and 194J
• if such sum, or aggregate of such sums exceeds Rs. 50 lakhs in a year
To reduce the compliance burden, it is proposed that such individuals or HUFs shall be able to deposit the
tax deducted using their PAN and shall not be required to obtain TAN.
However, an application for lower withholding tax certificate can be made to the Assessing Officer by the
assessee.
This amendment will take effect from 1st September, 2019.
With the proposed amendment, the Government intends to prepone the collection of tax on substantial
payments in respect of contractual or professional work which was earlier outside the ambit of TDS.
Further the mechanism for collection of such data has also been established.
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