New Delhi, May 14 (PTI) Tax deducted or collected at source on payment of dividend, insurance policy, rent, professional fee and on the acquisition of immovable property has been cut by 25 per cent for a period up to March 31, the tax department has said.
Following Finance Minister Nirmala Sitharaman''s announcement of a reduction in the rate of tax deducted at source (TDS) and tax collected at source (TCS) for non-salaried payments, the Central Board of Direct Taxes (CBDT) notified revised rates that will be applicable from May 14, 2020, to March 31, 2021.
Clarifying on why the TDS rate has not been reduced for salaried class, Finance Secretary Ajay Bhushan Pandey on Thursday said TDS is deducted from salary after taking into account various eligible deductions like 80C and others of the salaried person.
This, he said, has been done to ensure that salaried individual do not have to bear the burden of paying high taxes at the year end and also the interest burden.
"If we reduced the TDS rate for salaried class then their compliance burden would have increased because they would be required to pay higher taxes at the year end along with interest. Hence TDS rate has not been cut for salaried class," he said.
He further said that cash withdrawal above Rs 1 crore from banks would continue to attract 1 per cent TDS and such transaction would not enjoy the benefit of reduced TDS rate. Similarly, there has been no cut in TDS rate for foreign remittances as well as where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.
Speaking to reporters, Pandey said there are 23 such items in which there is a reduction in TDS rate, 7 items with lower TCS. He said a 10 per cent TDS was levied on interest on securities, interest on bank account, dividend payments, which has now been reduced to 7.5 per cent.
"This is done to ensure businesses have liquidity," he said.
Announcing a slew of measures to help companies and taxpayers tide over hardships caused by coronavirus lockdown, Sitharaman had on Wednesday stated that the reduction in TDS/TCS rate would release about Rs 50,000 crore in the hands of people.
In the notification, the CBDT said while TCS on sale of the motor vehicle above Rs 10 lakh has been cut to 0.75 per cent from 1 per cent earlier, TDS on 23 items has been reduced.
The CBDT said TDS on payment for life insurance policy has been reduced to 3.75 per cent from 5 per cent, while that on dividend and interest as well as rent for immovable property has been cut to 7.5 per cent from 10 per cent earlier.
The 1 per cent TDS charged on payment made for the acquisition of immovable property has now been reduced to 0.75 per cent. Payment of rent by individual or HUF has been cut to 3.75 per cent from 5 per cent earlier.
TDS on e-commerce participants has also been reduced to 0.75 per cent from 1 pr cent.
Similarly, tax on professional fee has been reduced to 1.5 per cent from 2 per cent.
TDS on payments in respect of deposits under National Savings Scheme has been reduced to 7.5 per cent from 10 per cent and that on payments for re-purchase of units by Mutual Funds to 15 per cent from 20 per cent.
The same on insurance commission and brokerage have been cut to 3.75 per cent from 5 per cent.
TDS on payment of dividend by mutual funds has been reduced to 7.5 per cent from 10 per cent.
TCS on sale of tendu leaves, scrap, timber, forest produce, and minerals such as coal, lignite or iron ore has also been reduced.
The CBDT said there shall be no reduction in rates of TDS or TCS where the tax is required to be deducted or collected at a higher rate due to the non-furnishing of PAN/Aadhaar.
Nangia Andersen LLP Director Sandeep Jhunjhunwala said: "The reduction of TDS and TCS rates on non-salaried payments by 25 per cent will set free additional cash in the hands of the vendors, and help increase liquidity in the economy".
"This relief could be enjoyed by all businesses and would play a pivotal role in increasing cash flows as the beneficial rates would be available until the end of the current financial year."
Deloitte India Partner Rohinton Sidhwa said, "The TDS / TCS cut will release liquidity into the system. Most assessees would have deluged the tax department with applications for lower withholding in any case and this effectively will also reduce administrative burden".
PwC India Partner (Tax and Regulatory) Vikram Doshi said, "The immediate reduction of TDS rate by 25 per cent is a direct and practical measure to increase liquidity in the system. While there was an expectation of a higher rate of reduction, the longer period of reduction till March 31, 2021, balances the slightly lower rate.
"The extension of due dates of various compliances provides additional relief given the practical difficulty in undertaking compliances." PTI JD ANZ MKJ
Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI