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Govt announces 25% cut in TDS/TCS rate for non-salary payments


Finance minister Nirmala Sitharaman introduced measures to provide more funds at the disposal of the taxpayers as part of her first tranche of the Rs 20 lakh crore economic package.

The minister lowered the rates of tax deduction at source (TDS) for non-salaried specified payments made to residents and rates of tax collection at source (TCS) for the specified receipts by 25%.

The reduction will kick into effect from May 14 and will be valid on payment for contract, professional fees, interest, rent, dividend, commission, brokerage, among others, for the remaining part of the ongoing financial year.

“This measure will release liquidity of Rs. 50,000 crore,” Sitharaman said.

Experts however said that the relief on rate reduction may not be adequate, given that the business for such contractors or professionals or agents would have taken a hit during the course of the pandemic leading to lower earnings.

“The taxpayer needs to be mindful of their obligation to pay the advance tax (including the shortfall arising from reduction of TDS/TCS) on or before the specified advance tax dates. One should not take this as a reduction in overall tax liability,” said Amit Singhania, Partner, Shardul Amarchand Mangaldas &Co.

“While there was an expectation of a higher rate of reduction, the longer period of reduction till 31 March 2021, balances the slightly lower rate,” said Vikram Doshi Partner Tax & Regulatory PwC India.

The government also announced that it will issue all refunds to charitable organisations and other non-corporate tax payers. Till now over Rs 18,000 crore has been issued as refunds to small taxpayers. ET had reported that the government will look at issuing refunds for large companies at a later stage.

Further, due date of all income-tax return for the financial year 2019-20 will be extended from July 31 and October 31, till November 30. Tax audit deadline has also been extended by a month till October 31.

Daksha Baxi, head-international taxation at Cyril Amarchand Mangaldas said that dates of advance payment of tax should have been extended as well.

The government has also extended the period of Vivad se Vishwas Scheme, which allows taxpayers to settle disputes without additional amount, till December 31, 2020.

“This will encourage more taxpayers to opt for the amnesty scheme and unshackle themselves from legacy income tax litigation,” said Sandeep Jhunjhunwala, Director, Nangia Andersen LLP.

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