Industry body Assocham on Thursday suggested the government to cut Tax Deducted at Source (TDS) in the next Budget with a view to reducing litigation on the application of correct rate.
Presently, there are various rates of TDS prescribed under the Income Tax Act on different categories of transactions and that has led to ambiguities in the context of applicability of relevant sections and correct rate, resulting in litigation, the chamber said.
It has suggested “slashing of TDS to one or two rates and could be as low as 0.1 per cent or 1 per cent”.
To streamline these provisions, Assocham said, it is desirable that at the maximum one or two rates may be prescribed.
“This would achieve the twin objective of creating a log of the transaction in the tax department’s database (in cases where the trial cannot be established by other sources) while reducing litigation on the application of the correct rate,” it added.
It also said that at present, there are about 40 sections under the act dealing with TDS and in addition, there is a huge list of rules and forms associated with these TDS provisions.
“It is evident from the statistics, that only a few sections contribute significantly to the total collections by way of TDS. The other sections contribute a minuscule portion to the total amount of TDS collection.” “Such low figures emphasize the need for reconsideration of these provisions, considering that though their removal would have a little impact on the tax collections, it can provide relief for the taxpayers from the necessary compliance burden which revolves around such provisions,” it said.