As per reports in newspapers ,a committee on direct tax reforms has recommended major reforms on TDS(tax deducted at source).Under
this report as reported by Media Not only TDS rates has been proposed
to be reduced but cut off amount has also been recommended to be
enhanced.
This report of 90 pages is yet to be submitted to Ministry of
Finance.The cut off limits has not been amended since last five years,
whereas inflation is also 7-8 % ,so accordingly cutoff amount should be
enhanced by at least by 40-50%.
TDS on interest income :Present Cut off amount
on tds on interest is Just 10000/- for bank interest and 5000 for other
interest and rate of deduction is 10% .However ,Person with age up to
60 may apply for non deduction of tax at source on form 15G if his total
income is less than exemption limit.
But if income of person is more than exemption limit and tax liability
is nil after claiming of various deduction then he can not furnish form
15G. So TDS is being deducted by banks on interest earned for such
person having nil tax liability.
In a 90-page report, which will be submitted to the Finance Ministry
this week, the committee has instituted TDS reforms as one of the core
recommendations for Union Budget 2016. Once endorsed, these
recommendations will be incorporated in the coming budget.
The committee has proposed to raise TDS limit on bank deposit interest
from Rs 10,000 to Rs 15,000 and rate of deduction from 10 % to 5 %.
It also has a big relief to brokers. Currently, one has to pay 10% TDS
on commission or brokerage of Rs 5,000 or above. The committee has
suggested that the limit should be Rs 15,000 with 5% TDS.
Similarly, National Saving Scheme (NSS) depositors may get a relief.
Currently, interest of Rs 2,500 and above earned under NSS deposits
attracts TDS. The committee has suggested that the limit be increased to
Rs 15,000 and the TDS be reduced from 20% to 5%.
Home and building owners will get a relief on rental income. The
committee wants the limit of rental income for paying TDS be hiked from
the existing Rs 1,80,000 to Rs 2,40,000. This TDS limit should also be applicable to plant, machinery and equipment, it said.
The committee has recommended a complete overhauling and even deletion
of irrelevant rules of different TDS components. For instance, 'interest
on securities' have to be deleted and should be merged with interest
income as a new section (194 A) of Income Tax Act from June 1, 2016.
We hope that most of the recommendations will be accepted in the Union budget.
