With Budget 2019 increasing their TDSresponsibilities, individuals will now have to deduct tax at source in 3 different types of situations. "High value payments made by individuals have now come in the compliance net and require tax deduction at source. An individual or HUF availing contractual or professional services will have to deduct TDS @5% in case the aggregate payments made to a single service provider during the year exceeds Rs 50 lakh," Shalini Jain, tax partner, EY India. Budget 2019 proposes to make it mandatory for individuals to deduct tax at source on:
(i) Payments of over Rs 50 lakh to contractors, professionals
It has been proposed to make it mandatory for individuals and HUFs to deduct tax at source (TDS) on any payment of Rs 50 lakh per annum to contractors and professionals. This means if the total payments you have made to a single contractor for wedding functions, house renovation or to a single professional during a financial year exceeds Rs 50 lakh, then TDS will be cut at 5 percent.
(ii) Payment of parking charges, maintenance charges etc when buying a house
Charges such as club membership fees, car parking fees, electricity and water facility fees, maintenance fee, advance fee etc. will soon need to be added into the cost of buying property amount while determining the amount of tax to be deducted at the time of making property. This amendment will come into effect from September 1, 2019.
Currently, these charges were excluded while calculating the amount of tax to be deducted at the time of making payment for property. Only amount paid for buying a house is considered to determine the amount of tax to be deducted. Currently one has to deduct tax only on the payment made to buy a house.
(iii) TDS on monthly rent payments above Rs 50,000
These are in addition to the existing responsibility to deduct tax at source from rent payments of Rs 50,000 and above per month.
Individuals and HUFs who are not required to get their financials audited and are paying rent of more than Rs 50,000 per month have to deduct 5 percent of the rent paid in a financial year as tax. And if you do not comply, you have to pay 1% interest for every month of delay in deducting the tax. The penalty is higher at 1.5% per month if the tax has been deducted but not deposited.
While the government's aim is to widen and deepen the tax base through these steps, it increases the financial accounting liability for individuals impacted by these rules.
