The government on Wednesday slashed TDS/TCS rate for non-salary payments to residents by 25 per cent for the remaining months of the fiscal and extended the due date for filing income tax returns for 2019-20 till November 30, 2020.
Announcing a slew of measures to help companies and taxpayers amid the COVID-19 crisis, Finance Minister Nirmala Sitharaman said the reduction in TDS (tax deducted at source)/TCS (tax collected at source) rate would release about Rs 50,000 crore in the hands of people.
The extension of ITR filing deadline would ease the compliance burden for taxpayers, she added.
"From tomorrow till March 31, 2021, the TDS/TCS rates have been reduced by 25 per cent of the existing rate... This shall also apply to all payments for contracts, interest, rent, dividend, commission or brokerage.. all of these will be eligible for 25 per cent rate reduction.
"This reduction would release nearly Rs 50,000 crore in the hands of the people who would have otherwise paid it as TDS," Sitharaman said.
Also, the direct tax dispute resolution scheme -- Vivad Se Vishwas -- has been extended by six months till December 31, 2020.
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Under the scheme, where the taxpayers' appeals are pending before appellate forums, high courts and the Supreme Court, he will have the option to settle the dispute on payment of 100 per cent tax (125 per cent in search cases) and get complete waiver of interest and penalty if he pays by December 31.
Further, where arrears are related to disputed interest or penalty only, then 25 per cent of disputed penalty or interest will have to be paid if the payment is made by December-end.
As many as 4.83 lakh direct tax cases involving Rs 9.32 lakh crore in disputed taxes are locked in various appellate forums. This amount is the equivalent of 82 per cent of the government's direct tax revenue in 2018-19.
This is the second extension given to taxpayers for availing the Vivad Se Vishwas scheme. In March, the validity of the scheme was extended till June 30.
Sitharaman further said all pending refunds to charitable trusts and non-corporate business and professions, including that of proprietorship, partnership, LLP and cooperatives shall be issued immediately.
Stating that the income tax department has already cleared Rs 18,000 crore worth of refunds where the quantum due was up to Rs 5 lakh, she said, "Now we are saying that the pending refunds of all these, many of whom can be very small... all their refunds will be given immediately."
Nangia Andersen LLP Director Sandeep Jhunjhunwala said "the reduction of TDS and TCS rates on non-salaried payments by 25 percent will set free additional cash in the hands of the vendors, and help increase liquidity in the economy."
Deloitte India Partner Rohinton Sidhwa said, "The TDS / TCS cut will release liquidity into the system. Most assessees would have deluged the tax department with applications for lower withholding in any case and this effectively will also reduce administrative burden. "The extension of the VSV scheme without additional payment to December 2020 will allow assessees and the department alike adequate time to process the claims to reduce litigation."
"The extension of due dates of various compliances provides additional relief given practical difficulty in undertaking compliances."
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