Vivek Jalan
The income tax department has received 6,500 suggestions from stakeholders over the past month on review of the Income Tax Act. Finance Minister Nirmala Sitharaman recently chaired a meeting comprehensive review of the Income Tax Act, 1961, consisting of Revenue Secretary CBDT chairman Ravi Agarwal, and senior CBDT officials.
22 specialised sub-committees have been established to review the various aspects of the Income Tax Act. These committees have actively engaged in numerous meetings 'both in person and via VC' with domain experts to collaboratively explore and recommend improvements to the Act.
Many of the taxpayers and assess have infact represented on TDS/ TCS provisions simplifications. Our suggestion would be as follows on the same -
A. Reduce no: of Sections under TDS
As of now, there are 71 Sections under TDS as follows -
i. Section 190-191(2 Sections) - Provision for TDS/ Direct Payment
ii. Section 192 - 196D (45 Sections) - Provisions for specific deductions
iii. Section 197 - 206CCA (24 Sections) - Procedural
Most of the Sections can be merged and overlapping can be reduced. Infact there can be a single comprehensive Schedule of Rates of TDS (Just Like the Customs Tariff Act) with Schedule Notes.
B. Lower Rates of TDS
While some action has been taken to lower the TDS rates in this Finance Act (No.2) of 2024, yet still there is a huge refund being generated just because of the high TDS rates. It creates a lot of administrative work for the Income Tax Department too. Hence, the rate should be low.
Consequently, interest on default/deferral of Advance tax may be made higher.
C. There should not be any overlap between TCS and TDS
For example - 194Q Vs 206C(1H) - Incase turnover of Buyer and Seller in the preceding year exceeds Rs.10 Cr. and the purchase exceeds Rs.50 Lakhs in the current year - Buyer would deduct TDS @ 0.1% u/s. 194Q. Now incase the buyer does not deduct TDS u/s 194Q, then the supplier has to apply TCS. This creates an unnecessary burden on the supplier as he gets to know incase the buyer has not deducted TDS only at the fag end of the year.
It is argued that there is no need to have two parallel provisions for the same transaction. Just 194Q or 206C(1H) would be sufficient.
Introduction of 194Q and overlap with Section 206C (1H) and unintended consequence of Rule 31AA
In case of purchase of goods on which the purchaser is obliged to deduct TDS u/s. 194Q the seller is still required to incorporate the details of such sale under Rule 31AA (Return) along with the details of TDS deducted on purchase for the purpose Sec. 206C(1H). In order to incorporate the details of TDS the seller has to collect the details of TDS. It would be difficult for the seller to collect the related information with regards to TDS applied by the buyer and then incorporate the same in TCS return under Rule 31AA. Even if, the seller is not responsible for collection of TCS on sale of goods u/s. 206C(1H) he will have to update in the return. Therefore, it is requested to make suitable amendments in Income Tax Rules, 1962 to exempt such requirements as per Rule 31AA.
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