Provisions for TDS need to be rationalised under one section

RUN UP TO THE BUDGET 2004-05/ CII

For Tax Deducted at Source (TDS), Sections 192 to 197 of the Income Tax Act specify the various payments from which the taxpayer needs to deduct tax at the prescribed rates in force. The Confederation of Indian Industry (CII) has suggested the finance ministry to make improvements on the exemptions and provisions front.

In its pre-Budget memorandum, CII has said there were a number of provisions for TDS, which need to be rationalised under one single section. So, there is need to consolidate the various sections like stipulations, rates for TDS exemption limits etc.

Also, exemption limits under Sections 194A, 194C, 194I and 194J are very low and need to be suitably revised.

Under Section 192, short or excess deduction of income-tax in a financial year out of various employees should be allowed to be adjusted by the employer. This would allow employees to claim refund, CII said.

CII has pointed out that under Section 195, tax authorities take a conservative view in case of non-resident contractors. It has called for clear guidelines for deduction of out of contract payments to non-residents.

CII has stressed on interest for any delays of less than one month to be penalised. The chamber has also called for specific time limit for completion of verification of withholding tax returns such as returns filed under Section 139.

The absence of a specific time limit leaves the issue open-ended and allows the authorities to open cases.

On TDS for data communication, CII has suggested that payments made to foreign companies for data communications should not be covered under "fees for technical services", and accordingly, should be out of the purview of Section 195.

On rationalisation of the tax deduction at source provision for banks, CII said that banks should be allowed to opt for centralised jurisdiction for the deposit of TDS, issue TDS certificate in Form 16A and filing of consolidated TDS returns, in the centralised jurisdiction opted for by the bank.