The government has proposed significant simplifications to the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions in the new Income Tax Bill. These changes aim to streamline tax compliance, reduce complexity, and enhance efficiency for taxpayers and tax authorities alike.
Below are the FAQs related to these changes
Q.1. What are the highlights of simplification made in TDS/TCS provisions?
Ans. In the existing Act, there are 43 sections that specify the various sums that are liable to TDS, depending on the status of the payer/payee, subject to applicable monetary limits. The sections provide the rate at which tax is liable to be deducted at source.
In the proposed Bill, all these sections have been merged into one section. Section 393 of the proposed bill contains 3 Tables applicable to three broad categories of Payees- Residents, Non residents and any person. The respective Table for each category in turn specifies the nature of income or sum, monetary threshold, payer/person and the applicable rate of TDS.
In the table for Resident payees, similar nature of sums have been clubbed together, such as Commission, Rent, Interest, Income from Capital Market, etc. Further, a separate Table has been provided covering the cases/conditions where TDS is not required to be deducted.
Similarly, the provisions relating to TCS have been merged and placed in one section. Section 394 of the proposed bill contains one Table which specifies the nature of receipts, monetary threshold, collector and rate of TCS. The said section also lays down the conditions for no collection of TCS.
Furthermore, provisions relating to the following matters, which were present throughout the Chapter in the existing Act, have been merged and placed together as independent sections in the proposed Bill,
a. Certificates including Lower Deduction/Collection Certificates
b. Compliance and reporting (filing of statements etc.)
c. Consequences of failure to deduct or collect tax or pay the tax deducted or collected
d. Processing of Statements
Q.2. What is the extent of reduction in terms of the number of sections and the number of words?
Ans. In the proposed Bill, provisions relating to TDS/TCS are contained in 13 sections as against 69 sections in the existing Income Tax Act,1961.
The relevant parts of the Chapter XIX of the proposed Bill contains 14,675 words as against 27,452 words in the existing Income Tax Act,1961.
Q.3. How many rates of TDS /TCS have been prescribed in the proposed Bill?
Ans. Rates of TDS/TCS as well as thresholds are same as in Income Tax Act, 1961(being amended upto Finance Bill, 2025)
Conclusion
The proposed Bill's approach to simplifying TDS and TCS provisions is a welcome move for taxpayers and businesses. By reducing redundancy and consolidating multiple sections, the Bill enhances clarity, improves compliance efficiency, and reduces the burden of navigating complex tax laws. While the fundamental tax rates remain the same, these reforms promise a more streamlined and taxpayer-friendly experience.
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