Finance minister P Chidambaram in Budget 2008-09 has introduced a number of measures to increase tax compliance through tax deducted at source (TDS) and administrative measures.
The minister has expanded the scope of TDS to include two more items of income. He has proposed to include under TDS all associations of persons (AOPs) and body of individuals (BOIs) who in the form of joint ventures or consortiums are operating special purpose vehicles to carry out construction work. While contractors already get TDS deducted, there are many such SPVs that manage to evade taxes.
The proposal will, however, come in to force from June 1. Chidambaram has also proposed to bring interest payments, royalty and payments for technical services to a non-resident or foreign company under the TDS net.
In another similar measure to plug revenue leakage, the Budget has also announced that cash payments of exceeding Rs 20,000 in a day to the same person will no longer be permitted.
All business payments over Rs 20,000 are made through account payee cheques to ensure the genuineness of the transaction. Tax authorities realised that people were paying through cash in tranches less than Rs 20,000 to evade paying tax on them.
?The move is aimed at curbing tax evasion in the transport industry where a lot of payments are made in cash,? Vikas Vasal executive director KPMG said.
Meanwhile, to bring more administrative convenience in TDS, Chidambaram has also announced that the deadline for filing of income tax and fringe benefit tax returns by companies, firms and working partners in firms will now be preponed to September 30 from the previous deadline of October 31.
Giving itself some more time to for full e-payment of taxes, the Budget has also announced that Form 16 and Form 16 (A) will continue till 2010.