Key TDS Changes Effective from 1st October, 2024
A concise compilation of the major TDS amendments that came into force on 1 October 2024.
Key TDS Changes Effective from 1st October, 2024
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1. Introduction
Tax Deducted at Source (TDS) is one of India’s most important mechanisms for early tax collection and compliance monitoring. With evolving business practices, digital transactions, and sector-specific risks, the government periodically updates TDS provisions to strengthen compliance and plug revenue leakages. From 1st October 2024, several significant TDS changes took effect under the Income Tax Act and GST law. These changes impact individuals, businesses, government entities, e-commerce platforms, and especially industries involving high-risk transactions. Understanding these amendments is essential for ensuring correct TDS deduction, preventing interest and penalties, and maintaining seamless tax compliance.
Rationale for the October 2024 TDS Reforms
Why these changes were introduced.
The October 2024 TDS changes aim to achieve three major objectives: First, to widen the tax base by bringing unreported sectors into the withholding mechanism. Second, to promote transparency in transactions where tax evasion risk is high. Third, to harmonize TDS under both GST and Income Tax for improved traceability. The amendments reflect a policy shift towards a more integrated, technology-driven compliance system, where TDS acts as a real-time indicator of taxable transactions.
Major Amendments Effective 1 October 2024
Section-wise and sector-specific changes introduced in the TDS framework.
3. Introduction of TDS on Metal Scrap Under GST
One of the most impactful changes effective from 1st October 2024 is the mandatory deduction of TDS on the supply of metal scrap under GST. This change applies especially to government departments, PSUs, local authorities, and other notified entities.
Metal scrap has historically faced issues of under-reporting, cash transactions, and fake billing. By introducing TDS, the government creates a financial trail, ensuring that scrap suppliers report sales accurately.
The applicable TDS rate is 1% of the taxable value, and the buyer must deduct and deposit this amount before releasing payment. This strengthens compliance in the metal recycling industry and reduces input tax credit fraud.
4. New TDS Mechanism for High-Value Transactions
Starting 1st October 2024, additional monitoring is imposed on high-value transactions such as large contractor payments, professional fees, and commission payouts.
The revised rules require stricter documentation, PAN/Aadhaar verification, and consistency checks across TDS returns and Form 26AS.
The aim is to curb revenue leakage from large commercial contracts and to ensure that TDS reporting aligns with income disclosure by recipients.
5. Mandatory PAN-Aadhaar Validation Before TDS Deduction
The new norms make PAN-Aadhaar linking mandatory for all persons receiving TDS credits.
If the deductee’s PAN is not linked with Aadhaar, higher TDS will apply at double the normal rate (or 20%, whichever is higher).
From 1st October 2024, TDS systems automatically validate PAN-Aadhaar at the time of filing returns.
This ensures that incorrect or defective PANs cannot be used for claiming lower TDS rates or avoiding reporting obligations.
6. Changes in TDS Rates for Certain Sections
A few TDS sections undergo rate revisions or clarifications effective from 1st October 2024.
These include categories such as:
- certain contractual payments,
- technical fees where earlier ambiguities existed,
- commission or brokerage payable to agents,
- rent paid by large enterprises,
- insurance maturity payouts above specified limits.
These changes ensure consistency with current economic realities and reduce interpretational disputes faced by taxpayers.
7. Expansion of TDS Compliance for Digital and Online Transactions
With the rapid rise of digital commerce, the TDS framework now extends deeper into the following areas from October 2024:
- online gaming winnings,
- influencer payments,
- digital marketing payouts,
- e-commerce operator collections,
- payments made through digital platforms or fintech intermediaries.
The changes ensure that digital transactions do not escape taxation simply because they occur on new-age platforms.
TDS acts as the first point of capture for tax authorities, providing visibility into digital income streams.
8. TDS Under Section 194-O Strengthened for E-Commerce
Section 194-O, which mandates TDS on e-commerce transactions, has been expanded to cover additional categories of sellers and service providers.
From 1 October 2024, platforms must deduct TDS even in cases where:
- seller is non-resident but operates through an Indian platform,
- payments are settled through third-party gateways,
- consideration is received partially offline and online.
This change deepens compliance in the e-commerce sector and eliminates loopholes previously exploited to avoid TDS.
9. New TDS Rules for Benefits and Perquisites (Section 194R)
Effective October 2024, stricter reporting and documentation apply under Section 194R relating to benefits, gifts, incentives, and perquisites given to business associates.
Companies must maintain clearer audit trails for samples, gifts, sponsored travel, promotional items, or in-kind benefits.
The 10% TDS continues to apply, but the reporting burden increases due to revised guidelines.
This change curbs misuse of business incentive schemes that often went unreported as taxable income.
10. Strengthening of TDS on Virtual Digital Assets (VDA)
With rising cryptocurrency and NFT transactions, TDS on VDAs has been reinforced from 1 October 2024.
Platforms, exchanges, brokers, and facilitating agents must now:
- deduct TDS even for wallet-to-wallet transfers,
- report transactions above minimum thresholds,
- validate KYC and PAN details before execution.
This makes VDA taxation more robust and reduces unrecorded digital wealth transfers.
11. Mandatory Electronic TDS Certificate Issuance
From October 2024, all TDS certificates (Form 16A, 16B, etc.) must be issued only through the government’s digital utility.
Manual certificates or unsigned documents are no longer valid.
This ensures authenticity, prevents tampering, and standardizes TDS credit proof for employees and vendors.
12. Stricter Penalties for TDS Non-Compliance
The October 2024 changes introduce tighter penalty norms for:
- late deduction of TDS,
- late deposit,
- mismatch in quarterly returns,
- incorrect PAN reporting,
- failure to issue TDS certificates.
Businesses now face higher interest liability and stricter audits.
These measures push deductors to maintain disciplined TDS processes.
Impact on Stakeholders
How different groups are affected by these TDS measures.
13. Impact on Businesses, Individuals, and PSUs
For Businesses:
Higher compliance workload, need for updated software, and stricter validation protocols.
For Individuals:
Uniform TDS enforcement ensures more accurate reflection of income in Form 26AS and AIS.
For PSUs and Government Bodies:
TDS on scrap, contracts, and professional services increases transparency in public procurement and vendor payments.
Conclusion
Final observations from the thesis.
The TDS changes effective from 1st October 2024 mark a major shift toward a more transparent, technology-enabled, compliance-driven tax ecosystem. By expanding TDS coverage, introducing sector-specific rules such as TDS on metal scrap, tightening documentation norms, and integrating PAN-Aadhaar checks, the government strengthens oversight on income reporting and tax collection.
For businesses and individuals alike, adapting to these changes is essential to avoid penalties, ensure smooth operations, and maintain proper tax records. Overall, these reforms support efficient tax administration and promote a fair and accountable financial environment.