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Industry bodies have asked the Finance Ministry to simplify the rates of withholding tax (TDS) for the Union Budget, which will be presented in February next year. Business standard reported. This was intended to reduce the compliance burden on taxpayers and also avoid lawsuits.
Industry bodies have asked the Finance Ministry to simplify tax rates deducted at source (TDS) as the Union Budget will be presented in February next year (Representational Image/Pixabay)
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Why should TDS rates be simplified?
Under the Income Tax Act, there are currently 37 types of payments to residents, and the TDS rates range from 0.1% to 30%.
This often results in disputes over categorization and interpretation, the report said, adding that cash flows to the sector also end up being blocked and the government may be forced to pay interest on refunds.
What are the suggestions from industry organizations?
“The government has made a good start in the simplification process by reducing TDS rates on various payments from 5 percent to 2 percent through the Finance (No.2) Act 2024,” the report quoted FICCI’s submission as saying. it is suggested that there are only three rate structures for TDS payments – TDS on salary at the fixed rate, TDS on lotteries/online games etc. at the maximum marginal rate and two standard rates of TDS for different categories.
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The CII also made a similar proposal and asked for two to three categories of payments and a small negative list that would not be subject to payment of TDS, the report said.
The CII also said that the TDS for pay grade may be at normal rates but it may be 30% for lotteries and horse racing winnings. It also added that existing TDS sections with a rate lower than 5% can be continued at the existing rates, while all other payments can be taxed between 2 and 4%, while payments to senior citizens and charities can be on the exemption list .
According to the report, FICCI also called for an independent dispute resolution forum comprising experts. “A time-bound resolution by an independent forum will increase confidence among taxpayers who can come forward to settle cases rather than filing a lawsuit for fear of punishment and prosecution,” the report said. “It will reduce lengthy litigation and also claims/refunds. locked up because of such lawsuits.”
The PHD Chamber of Commerce and Industry (PHDCCI), meanwhile, called for the abolition of the tax on securities transactions.
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