TDS may go down for professionals

The rate of tax deducted at source (TDS) for professional and technical services may go up from 5 per cent to 10-20 per cent.

The finance ministry is mulling the increase in TDS rate as it accounts for more than 35 per cent of the total direct tax collection.

The present provisions of the Income Tax Act stipulates that any kind of fee paid for professional or technical services should be subjected to five per cent TDS deduction.

The matter was discussed during the recently-held meeting of the income tax and revenue department chief commissioners. Some felt that increasing the TDS rate could hamper compliance and increase evasion.

"Since the TDS is paid in the first instance, doubling the rate could discourage people from making the right declaration," an official said. The CBDT had stated that there were several new activities that could be brought under the TDS.