TDS/TCS rate cut impact on Income Tax liability: In a bid to provide relief amid Coronavirus pandemic, the Government of India has reduced the rates of Tax Deducted at Source and Tax Collected at Source by 25 per cent on several transactions till March 2021.
TDS/TCS rate cut impact on Income Tax liability: In a bid to provide relief amid Coronavirus pandemic, the Government of India has reduced the rates of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) by 25 per cent on several transactions till March 2021. Finance Minister Nirmala Sitharaman last week announced the rates of TCS for specified receipts and TDS for non-salaried specified payments made to residents to be reduced by 25 per cent as part of the Rs 20 lakh crore Economic Package relief package announced by our honorable Prime Minister in order to provide more liquidity in hands of individual and companies.
According to the government, Rs 50,000 crore of liquidity will be introduced by the reduction of TDS/TCS rates. The reduced rates of TDS and TCS will be applicable from 14 May 2020 to 31 March 2021.
No impact on tax liability
However, experts say that the reduction in rates of TDS and TCS will not have any impact on the impact tax liability of individuals.
During lockdown, activities of the business were stopped and liquidity is the biggest crunch in hands of tax payers which will lead to default in various tax compliances and would lead to levy of huge interest and penalties. Hence in order to provide relief to the taxpayers and ensure compliance with the tax laws, rates of TDS and TCS have been reduced which shall have a massive impact on the cash flow in hands of deductor as well deductee for the specified payments,” Sameer Mittal, Managing Partner, Sameer Mittal & Associates LLP and Chairman, International Trade Council in India, told FE Online.
Benefit for Self-employed, Professionals and Senior citizens
Mittal further said that the decision of the government may benefit self-employed, professionals and senior citizens. “The announcement will provide benefits to the self-employed, professionals and senior citizens earning interest income and rental income. However, no relief has been provided to the salaried employees. It should be noted that the reduction in rates of TDS / TCS will not have any impact on the ultimate tax liability payable by the taxpayers,” said.
The Central Government has also extended the dates of filing of various tax returns to ensure timely submission of various returns and compliance of tax laws. The due dates for all income tax returns for FY 2019-20 has been extended from 31 July, 2020 and 31 October, 2020 to 30 November, 2020 and tax audit from 30 September, 2020 to 31 October, 2020.