Tax panel recommends raising TDS limit, cutting rate to 5%
The tax panel constituted to simplify tax laws and propose laws that improve ease of doing business said in its first set of recommendations that annual threshold limits in respect of TDS have just not come to be revised over the years.
- Jan 18, 2016,
- Updated Jan 18, 2016 1:11 PM IST
The RV Easwar panel on taxation has recommended increasing the various TDS (tax deducted at source) threshold and reduce the TDS rates (for individuals and HUFs) from existing 10 per cent to 5 per cent.
The tax panel constituted to simplify tax laws and propose laws that improve ease of doing business said in its first set of recommendations that annual threshold limits in respect of TDS have just not come to be revised over the years.
"With the liability of TDS being attracted on such tiny annual limits of Rs 2,500 in respect of 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, one can just imagine the enormous work that goes into compliance of these provisions. Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits," observed the report.
At present, tax is deducted at source if the interest income from bank FDs is Rs 10,000 or more, from Rs 5,000 from corporate FDs, Rs 2,500 on bonds.
The panel suggests new threshold for TDS on bank, corporate FDs and bonds to be increased to Rs 15,000 at the rate of 5 per cent (except other than individuals and HUFs in case of FDs, for which the panel recommends TDS at 10 per cent).
The panel also recommends increase in threshold limit for contractor payments from Rs 30,000 per transaction (with annual limit of Rs 75,000) to annual Rs 1 lakh and commission and brokerage payment of Rs 5,000 to 15,000. The TDS rate recommended is 5 per cent instead of existing 10 per cent.
The TDS limit for rent paid for plant, machinery and land, building has been increased from Rs 1,80,000 to Rs 2,40,000. The rate recommended is same as the existing one (1 per cent for rent paid for plant and machinery, and 10 per cent for land and building).
Other important observations/recommendations
- Nearly 65 per cent of the personal income-tax collection in India being raised through tax deducted at source (TDS).
- Today, the average tax rate of 10 per cent gets attracted only on taxable incomes beyond Rs 7,00,000.
The RV Easwar panel on taxation has recommended increasing the various TDS (tax deducted at source) threshold and reduce the TDS rates (for individuals and HUFs) from existing 10 per cent to 5 per cent.
The tax panel constituted to simplify tax laws and propose laws that improve ease of doing business said in its first set of recommendations that annual threshold limits in respect of TDS have just not come to be revised over the years.
"With the liability of TDS being attracted on such tiny annual limits of Rs 2,500 in respect of 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, one can just imagine the enormous work that goes into compliance of these provisions. Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits," observed the report.
At present, tax is deducted at source if the interest income from bank FDs is Rs 10,000 or more, from Rs 5,000 from corporate FDs, Rs 2,500 on bonds.
The panel suggests new threshold for TDS on bank, corporate FDs and bonds to be increased to Rs 15,000 at the rate of 5 per cent (except other than individuals and HUFs in case of FDs, for which the panel recommends TDS at 10 per cent).
The panel also recommends increase in threshold limit for contractor payments from Rs 30,000 per transaction (with annual limit of Rs 75,000) to annual Rs 1 lakh and commission and brokerage payment of Rs 5,000 to 15,000. The TDS rate recommended is 5 per cent instead of existing 10 per cent.
The TDS limit for rent paid for plant, machinery and land, building has been increased from Rs 1,80,000 to Rs 2,40,000. The rate recommended is same as the existing one (1 per cent for rent paid for plant and machinery, and 10 per cent for land and building).
Other important observations/recommendations
- Nearly 65 per cent of the personal income-tax collection in India being raised through tax deducted at source (TDS).
- Today, the average tax rate of 10 per cent gets attracted only on taxable incomes beyond Rs 7,00,000.