While reducing the tax deduction at source (TDS) rate on various levies for e-commerce operators, the Union Budget 2024, tabled in the parliament on July 23, 2024, allowed employees a credit of tax collected at source (TCS).
Finance Minister Nirmala Sitharaman proposed to offer a credit of TCS to be given in the TDS to be deducted on salary.
The move is likely to benefit many who use travel agents help for foreign tours exceeding Rs 7 lakh and even investing abroad. On October 1, 2023, the TCS rates were increased to 20 percent from 5 percent.
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Now an employee, working in a company and receiving salary can use these TCS Credits to adjust against the TDS on salary.
"Individuals, who are working as consultants with a company, cannot claim this benefit," says Paras Savla, partner at KPB & Associates.
Earlier one could set off the TCS only against advance tax payments, but this is usually relevant to self-employed and business income. Salaried individuals usually don’t need to pay advance tax unless they have booked profits from investments early during a financial year.
TDS is collected from each salary payment to ensure government receives due taxes in time over a period and the tax burden doesn’t pinch an individual toward the end of the financial year.
Also, the five percent TDS on many payments is being merged into the two percent TDS rate.
Additionally, the 20 percent TDS applicable on repurchase of units of mutual funds of unit trusts of India have been withdrawn.
The TDS on rental income has been reduced from 5 percent to 2 percent, offering relief to homeowners.
Also see: Good news for domestic taxpayers: Re-assessment window has been shrunk
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