TDS, TCS rates for non-salary payments cut by 25 pc till March 2021

New Delhi: The government on Wednesday slashed TDS and TCS rates for non-salary payments to residents by 25 percent 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.

ITR filing deadline extended

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.

However, there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar.

Explaining this, an official said for example, if the tax is required to be deducted at 20 per cent under section 206 AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20 per cent and not at the rate of 15 per cent.

Direct tax dispute resolution scheme

Also, the direct tax dispute resolution scheme — Vivad Se Vishwas — has been extended by six months till December 31, 2020.

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.

Refunds

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.”

With regard to extension of the income tax returns filing deadline, Sitharaman said all ITRs for 2019-20 fiscal which were to be filed by July 31 and October 31, 2020, will now have to be filed by November 30, 2020.

Also, the deadline for filing tax audit report has been extended by a month till October 31, 2020.

Currently, individuals and other non-corporate taxpayers not subject to tax audit or transfer pricing are required to file ITR by July 31.

Corporate taxpayers and other non-corporate taxpayers subject to tax audit (including partners/ directors of firms/ companies subject to tax audit) but not subject to transfer pricing are required to file ITR by October 31. These ITR filing deadlines has been extended till November 30.

Corporate and other taxpayers subject to transfer pricing are required to file ITR by November 30 and for them there has been no change in due date.

Also, income tax assessments getting time-barred on September 30 have been extended till December 31, 2020 and those getting time-barred on March 31, 2021 have been extended by six months till September 30, 2021.

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.”

Cash flows

“This relief could be enjoyed by all businesses and would play a pivotal role in increasing cash flows as the beneficial rates would be available till the end of the current financial year.

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.

PwC India Partner (Tax and Regulatory) Vikram Doshi said, “The immediate reduction of TDS rate by 25 per cent is a direct and practical measure to increase liquidity in the system. While there was an expectation of a higher rate of reduction, the longer period of reduction till March 31, 2021, balances the slightly lower rate.

“The extension of due dates of various compliances provides additional relief given practical difficulty in undertaking compliances.”

Shardul Amarchand Mangaldas & Co Partner Gouri Puri said, “Extending the timeline for making payments under Vivad se Vishwas was necessary to ensure its success given that many businesses cannot afford settlement under the tax amnesty at this time.”

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