Page 12 - Budget_2020

Union Budget 2020
Tax Deducted at Source and Tax Collected at Source

Reducing the Rate of TDS on Fees for Technical Services (FTS)
There was ambiguity on TDS on FTS, as to whether it would fall within the ambit of Sec 194C (2%) or 194J
(10%)

To reduce litigations, it is proposed to reduce the rate of TDS in Sec 194J, for FTS (other than professional
services) to 2% from existing 10%

AY 2020-21 and subsequent AYs

Enlarging the Scope for Tax Deduction on Interest Income
 To widen the tax base, TDS u/s 194A is proposed to apply to interest payments made by large co-
operative societies, if,
• total sales, gross receipts or turnover exceeds Rs. 50 crores during the FY immediately preceding the
FY in which the interest is credited or paid; and
• amount of interest, credited or paid, during the FY is;
- more than Rs. 50,000 in case of senior citizens and
- Rs. 40,000, in any other case
1st April 2020 (FY 2020-21 onwards)

Co-operative societies, have come under scanner in the recent past and have been largely considered as a

vehicle for transacting monies which are otherwise outside the ambit of taxation. The move seems to bring
them closer to banks and NBFCs. It is also noteworthy to mention that RBI is gradually tightening the rules
pertaining to co-operative banks to the extent feasible.

Widening the Scope of TDS on E-Commerce Transactions
 In order to bring e-commerce participants (e.g. suppliers, vendors, etc.) within the tax net, it is proposed
that: -
• TDS @ 1% shall apply on gross sale value of goods or provision of technical and professional services
facilitated through their platform or portal
• The rate shall be 5% in case no PAN/Aadhaar provided
• Exemption is granted to participants being individual or HUF provided gross amount of
sales/services is not exceeding Rs. 5 lakhs during the FY and PAN/Aadhaar is furnished
• Further, clarity is provided stating the same transaction shall not be liable to TDS under any other
provisions of TDS to avoid double taxation

1 April, 2020
st

The move expands the scope of tax collection; however, there are plenty of loopholes which needs to be
addressed like treatment of returns, refunds, cancellations, etc., which we hope would get clarified in due
course.

Value of Indian E-Commerce Market (US$ Billion)

200.00

150.00

63.70
38.50 50.00

2017 2018F 2020F 2020F 2026F

F - Forecast
Source: IBEF
10