TDS threshold limit under Section 194H and Form 16B issuance timeline for FY 2024-25

The TDS threshold limit under Section 194H, which governs the deduction of TDS on commission or brokerage payments, has seen significant updates for FY 2024-25, as outlined in the Union Budget 2024. These changes, which take effect from the new financial year, are aimed at simplifying the tax deduction process for businesses and professionals involved in commission payments. Let us explore a detailed breakdown of the revised TDS rates, the changes to the threshold limit, and the issuance timeline for Form 16B, which is crucial for property transactions. Understanding these amendments is vital to ensure tax compliance and avoid unnecessary penalties, especially as businesses must adjust to the increased threshold and rate changes.

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Table of Contents

TDS Threshold Limit Under Section 194H for FY 2024-25

Form 16B Issuance Timeline for FY 2024-25

Additional Notes on Form 16 for Salary Income (FY 2024-25)

Conclusion

FAQs

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TDS Threshold Limit Under Section 194H for FY 2024-25

Under Section 194H, TDS is levied on commission or brokerage payments made by one person to another. The Union Budget 2024 has brought about notable changes to the TDS rate on commission payments for FY 2024-25. Previously, the TDS rate for such payments was 5%. However, in an effort to reduce the tax burden and make compliance easier for smaller transactions, the rate has been revised.

1. Until September 30, 2024: The TDS rate for commission or brokerage payments remains at 5%.

2. From October 1, 2024, onwards: The TDS rate will be reduced to 2% for payments made under this section.

These changes aim to provide relief to smaller businesses or professionals who make lower-value commission payments. Additionally, it’s important to note that the TDS rate remains at 20% if the recipient does not provide their PAN details, irrespective of the date. This higher rate serves as a compliance mechanism for those failing to provide necessary tax identification details.

Threshold Limit for TDS Deduction in FY 2024-25 and FY 2025-26

In line with the Union Budget 2024 amendments, there have been changes to the threshold limit for TDS deduction under Section 194H. Previously, TDS had to be deducted when commission or brokerage payments exceeded ₹15,000 in a financial year.

1. For FY 2024-25: TDS will continue to apply when the total commission or brokerage payments exceed ₹15,000. This threshold remains unchanged for the first part of the financial year.

2. From FY 2025-26 onwards: The threshold limit will be increased to ₹20,000, which means TDS will only be deducted on commission payments exceeding ₹20,000 in a given year.

This revision helps to reduce the compliance burden for smaller businesses, ensuring that only those with substantial commission payments are required to deduct TDS. It provides greater flexibility to professionals and businesses making smaller payments, while still ensuring that tax is collected for larger transactions.

Form 16B Issuance Timeline for FY 2024-25

Form 16B is a critical TDS certificate issued by the buyer of immovable property when TDS has been deducted under Section 194-IA on property transactions. It serves as proof of the TDS deducted by the buyer and is essential for the seller to claim the TDS credit during income tax filing.

1. Applicability: Form 16B must be issued for property transactions where the TDS exceeds ₹50 lakh. The buyer is responsible for issuing this form to the seller.

2. Necessity: The buyer must provide Form 16B to the seller to enable them to claim the credit for the TDS deducted. This is crucial for sellers to accurately report and offset their TDS against their total tax liability.

Issuance Timeline and Deadlines for Property Transactions

Form 16B must be issued within 15 days from the due date of filing Form 26QB, which is the challan-cum-statement for TDS payment related to property transactions.

For property transactions occurring in May 2025, the relevant Form 26QB must be filed by 30th May 2025, which means that Form 16B must be issued by 14th June 2025. This timeline ensures that the buyer is compliant with the TDS requirements and provides the seller with the necessary documentation to claim the TDS credit.

These deadlines apply uniformly across the entire financial year, with Form 16B needing to be issued promptly following the filing of Form 26QB. Delays in issuing the form can cause inconvenience for the seller and may lead to penalties for the buyer.

Penalties for Delay in Issuance of Form 16B

Failure to issue Form 16B within the prescribed timeline results in a penalty under Section 272A(2)(g). The penalty for late issuance is ₹100 per day, which accrues until the form is issued. This penalty can add up quickly, so it is crucial for the buyer to issue the form on time to avoid unnecessary costs and ensure compliance with the tax authorities.

Importance of Form 16B in Property Transactions

Form 16B is an essential document for both buyers and sellers involved in property transactions. For the buyer, it serves as confirmation of the TDS deducted and deposited with the government. For the seller, it is proof of the TDS deducted and enables them to claim the tax credit during their income tax filing.

This form also ensures transparency and accountability in property transactions. It provides a clear record of the TDS payments and helps avoid disputes between the buyer, seller, and tax authorities. Ensuring that Form 16B is issued and received on time is a crucial part of the overall property transaction process.

Additional Notes on Form 16 for Salary Income (FY 2024-25)

While this blog primarily focuses on the changes related to Section 194H and Form 16B, it is also worth noting the importance of Form 16 for salary income.

1. Issuance Timeline: Form 16 must be issued by employers by 15th June 2025 for the financial year 2024-25.

2. Purpose: Form 16 serves as evidence of the TDS deducted on salary payments and is necessary for employees to file their income tax returns. This form outlines detailed salary components and any applicable exemptions.

The timely issuance of Form 16 for salary income is essential for taxpayers to file their returns accurately and within the prescribed deadlines.

Conclusion

The changes in TDS rates and threshold limits under Section 194H for FY 2024-25 bring much-needed relief to smaller businesses, reducing compliance burdens. The increase in the TDS threshold to ₹20,000 from FY 2025-26 onward ensures that only significant transactions are taxed under this section. Additionally, the timely issuance of Form 16B for property transactions is essential to ensure transparency, accuracy, and compliance with tax obligations. By staying updated with these key changes, businesses and individuals can ensure a smoother tax filing process and avoid penalties.

FAQ

Q1. What is the TDS threshold under Section 194H for FY 2024-25?

For FY 2024-25, the TDS deduction under Section 194H applies when the total commission or brokerage payments exceed ₹15,000 in a financial year. This threshold ensures that smaller transactions are not subject to TDS, providing relief to businesses or professionals making lower-value commission payments. However, from April 1, 2025, the threshold limit will increase to ₹20,000, meaning TDS will only apply if the payments exceed this amount.

Q2. When does the reduced TDS rate of 2% for Section 194H come into effect?

The reduced TDS rate of 2% for commission or brokerage payments under Section 194H will take effect from October 1, 2024. Until September 30, 2024, the TDS rate will remain at 5%. The reduction in rate is aimed at simplifying compliance and reducing the tax burden for businesses making smaller commission payments.

Q3. How does the TDS rate change for commission payments made after September 30, 2024?

After September 30, 2024, the TDS rate for commission or brokerage payments under Section 194H will decrease to 2%. This reduction applies to payments made on or after this date, with the aim of easing compliance for businesses involved in smaller-scale commission transactions. If PAN details are not provided by the recipient, however, the TDS rate will remain at 20%, irrespective of the date.

Q4. What happens if PAN is not provided for commission payments under Section 194H?

If the recipient does not provide their PAN (Permanent Account Number), the TDS rate on commission or brokerage payments under Section 194H will be 20%, regardless of the applicable TDS rate for the period. This higher rate serves as a compliance mechanism to ensure that tax is deducted from those who fail to provide their tax identification number, which is necessary for proper tax reporting.

Q5. How is Form 16B issued for property transactions in FY 2024-25?

Form 16B is issued by the buyer of an immovable property when TDS has been deducted under Section 194-IA (TDS on property transactions). The buyer must issue this form to the seller as proof of the TDS deducted. Form 16B must be issued within 15 days from the due date of filing Form 26QB, which is the challan-cum-statement for TDS payment. The issuance ensures that the seller can claim the credit for the TDS deducted when filing income tax return.

Q6. What is the deadline for issuing Form 16B for property transactions in May 2025?

For property transactions in May 2025, Form 26QB must be filed by 30th May 2025, and Form 16B must be issued by 14th June 2025. This deadline applies uniformly for all property transactions within the financial year. Buyers must comply with this deadline to avoid penalties and to ensure that sellers can claim their TDS credit on time.

Q7. What penalties apply for the late issuance of Form 16B?

If Form 16B is not issued within the prescribed timeline, a penalty of ₹100 per day applies, as per Section 272A(2)(g) of the Income Tax Act. This penalty continues to accumulate until the form is issued. Therefore, it is crucial for buyers to adhere to the deadline for issuing Form 16B to avoid unnecessary penalties and to ensure compliance with tax laws.

Q8. What is the significance of Form 16B for sellers in property transactions?

Form 16B serves as proof that TDS has been deducted and deposited with the government by the buyer in a property transaction. For the seller, this form is vital for claiming the TDS credit when filing their income tax returns. Without Form 16B, the seller cannot claim the TDS deduction, which may lead to higher tax liability. Thus, the form ensures transparency in the transaction and facilitates accurate tax reporting.

Q9. When must Form 16 for salary income be issued in FY 2024-25?

Form 16 for salary income must be issued by the employer by 15th June 2025 for the financial year 2024-25. This form provides a detailed breakdown of the salary paid to the employee, including any tax deductions at source (TDS) made on the salary income. It is essential for employees to receive Form 16 to file their income tax returns accurately and claim any refunds due.

Q10. What is the role of Form 16 in ensuring accurate tax filing?

Form 16 is a critical document that verifies the TDS deducted on salary income. It serves as proof of tax paid and outlines the detailed components of the salary, including any exemptions or deductions. For taxpayers, Form 16 is essential for accurate tax filing, as it helps them report their income and claim credit for taxes already paid. It also aids in calculating any additional tax liability or refund due at the time of filing returns.

Q11. How is the new TDS threshold for commission payments expected to affect businesses?

The increase in the TDS threshold for commission payments from ₹15,000 to ₹20,000 starting from FY 2025-26 will likely reduce the number of businesses and professionals required to deduct TDS. This change will provide relief to smaller businesses with lower-value commission transactions, reducing their compliance burden. However, businesses making commission payments exceeding ₹20,000 will still need to comply with the TDS deduction requirements.

Q12. What are the key deadlines for compliance under Section 194H and Form 16B in FY 2024-25?

Key compliance deadlines for FY 2024-25 include:

1. TDS under Section 194H: TDS must be deducted when commission or brokerage payments exceed ₹15,000 in a financial year. The applicable TDS rate is 5% until September 30, 2024, and 2% thereafter.

2. Form 16B for Property Transactions: Form 16B must be issued within 15 days from the filing of Form 26QB. For transactions in May 2025, Form 26QB must be filed by 30th May 2025, and Form 16B must be issued by 14th June 2025.

3. Form 16 for Salary Income: Employers must issue Form 16 for salary income by 15th June 2025 for the financial year 2024-25.

These deadlines are critical for ensuring timely compliance and avoiding penalties related to TDS deductions and certificate issuance.