A government-appointed panel on simplification of income tax laws on Monday recommended raising the threshold for deduction of tax at source (TDS), halving the TDS rate to 5 per cent and eliminating tax officer’s discretion with regard to treatment of capital gains on shares’ trading.
In its 78-page draft report, the Justice R V Easwar (retired) Committee said that TDS provisions need to be made more tax friendly and not as ‘tedious’ as they have remained over the years. Nearly 65 per cent of the personal income-tax collection in India was through TDS.
The committee, set up in October last year, suggested that TDS rates for individuals and Hindu Undivided Family (HUFs) be reduced to 5 per cent as against the present 10 per cent.
For other interest income, it suggested raising threshold limit to Rs 15,000 from current Rs 10,000 for bank deposits and Rs 5,000 for others. This means TDS rate of 5 per cent should be levied on interest income above Rs 15000, as against 10 per cent which is levied on earning over Rs 10,000 at present.
For interest on securities, it proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and halving the TDS rate to 5 per cent. The panel recommended raising TDS limit for payments to contractors from current limits of Rs 30,000 for single transaction and Rs 75,000 annually to Rs 1 lakh annual limit.
The TDS threshold on rent income is proposed to be raised from Rs 1.8 lakh annually to Rs 2.4 lakh per year.
The threshold for fees for professional or technical services is recommended to be raised to Rs 50,000 from Rs 30,000 but TDS rate is proposed to be retained at 10 per cent.
The draft report of the 10-member committee contains 27 suggestions for amendments under the I-T Act and eight for reform through administrative instructions.
To attract more retail investors to the stock market, the committee suggested levying lower short-term capital gains tax on annual earning of less than Rs 5 lakh from share trading, rather than treating it as business income.