New Delhi, May 14 (IANS) Taxpayers who have not furnished PAN or Aadhaar while filing tax returns will not get the benefit of lower rates of the tax collection at source (TCS) and the tax deduction at source (TDS).
Also, the TDS has not been reduced on salary income, cash withdrawal of over Rs 1 crore from bank accounts and foreign remittances, according to a top Finance Ministry official, here on Thursday.
As part of the Rs 20 lakh crore economic package, Finance Minister Nirmala Sitharaman on Wednesday announced 25 per cent reduction in TDS/TCS for the non-salaried specified payments made to residents for balance period of FY21 — from May 14 to March 31, 2021.
It was done to provide more money into the hands of taxpayers to deal with the economic situation amid the Covid-19 pandemic.
“The TDS on salary has not been reduced to prevent the salaried people from facing a heavy tax burden at the end of the year, at the time of filing returns and paying the full quota of taxes for the year.
“Similarly, cash withdrawals and foreign remittances have also been kept out of the rate reduction ambit to promote digital transactions and restrict larger outflow of money,” Finance Secretary Ajay Bhushan Pandey clarifying the position after second instalment of economic relief package was announced by the Finance Minister.
He said the reduction in TDS/TCS rates was largely to facilitate businesses get that much extra in this difficult period. The benefit would accrue to TDS on all kind of interest on securities, dividend, bank savings accounts where the rate will come down to 7.5 per cent from 10 per cent.
Similarly, payments to professionals would also attract lower TDS rate of 7.5 per cent. If you have sold a property or bought a car or paid rent, 1 per cent TCS is applicable. This will now come down to 0.75 per cent.
Pandey said 23 items under TDS and 12 under TCS would get the benefit of lower rate.
Apart from the 3-4 excluded items, it has also been clarified that reduced rates would not be applicable for taxpayers who have been denied lower rates (of TCS/TDS) due to non-furnishing of PAN/Aadhaar. The tax is required to be deducted at a rate of 20 per cent or higher for this category of taxpayers, as per the section 206 AA of the Income-Tax Act.
As per the announcement, the reduced TDS rate will be applicable to payment for contract, professional fees, interest, rent, dividend, commission and brokerage.
It’s estimated that the move will release Rs 50,000 crore liquidity.
The TCS is applicable on sale of Tendu leaves, timber contained under a forest lease, any other forest produce, scrap, minerals, grant of licence, lease of parking lots, mining and quarrying, sale of motor vehicle above Rs 10 lakh. The existing rates vary between 1 per cent and 5 per cent. It will now be between 0.75 per cent and 3.75 per cent.
The TDS rates vary between 1 per cent and 25 per cent for different segments, like interest in securities, dividend, repurchase of units by mutual funds, payment for acquisition of immovable property, fee for professional or technical services or royalty, income by securitisation trust, e-commerce participants. This will now stand reduced between 0.75 per cent and 18.75 per cent.
The necessary legislative amendments in this regard would be done in the due course, government sources said.
–IANS
sn/pcj