New Delhi, Jan 18 (IANS) The committee appointed to examine simplification of income tax laws on Monday recommended raising the threshold limits for deduction of tax at source as also slashing the rate of withholding tax.
“Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits,” the Justice (retired) R.V.Easwar Committee said in its draft report released here.
It recommended “enhancement and rationalisation of the threshold limits and reduction of the rates of TDS (tax deducted at source)” and that “TDS rates for individuals and HUFs (Hindu undivided family) to be reduced to 5 percent as against the present 10 percent”.
The panel said nearly 65 percent of the personal income-tax collected in India was through TDS, whose provisions need to be made less “tedious”, as they have remained over the years and, more tax friendly.
It said TDS is applicable on “such tiny annual limits” like Rs.2,500 on payment of interest on securities and on interest on NSS accounts, Rs.5,000 for payment of interest on private deposits and commission or brokerage, and Rs.10,000 for payment of bank interest.
The committee proposed raising the threshold for TDS to Rs.15,000 from Rs.2,500 annually and reducing the tax rate to 5 percent for interest on securities.
For other interest earnings it recommended raising the limit to Rs.15,000 from the present Rs.10,000 for bank deposits, and Rs.5,000 for others.
For payments to contractors, the panel has proposed raising the TDS limit from the current Rs.30,000 for single transaction and Rs.75,000 annually, to a Rs.1 lakh limit per annum.
It has also recommended deferring implementation of Income Computation and Disclosure Standards (ICDS) to provide more time to taxpayers to deal with changes in law such as to the Companies Act, 2013, and the proposed Goods and Services Tax (GST) Act.
The TDS threshold limit on rent income has been proposed to be raised from Rs.1.8 lakh annually to Rs.2.4 lakh.
The threshold for fees for professional or technical services is recommended to be raised to Rs.50,000 from Rs.30,000, but it said the TDS rate here may retained at 10 percent.
It suggested an increase in turnover limit for tax audit applicability from Rs. 1 crore to Rs.2 crore for business and Rs.1 crore for professionals.
Commenting on the report, global accounting firm KPMG India’s partner (Tax) Vikas Vasal said the panel’s recommendations seek to address many of the ground level issues being faced by taxpayers.
“Some of the procedural reforms on tax deduction at source and e-governance initiatives in the report, if implemented, will help improve the business sentiment in the country,” he said.
“Some of the reforms are to be undertaken through the Budget process, while others can be implemented through necessary clarifications in the form of circulars etc.,” Vasal added.
The committee has invited comments from the public till January 23, following which it will finalise the report’s first part by January 31.