New Delhi: A high level panel on simplification of income tax laws on Monday recommended raising the threshold limits for deduction of tax at source (TDS) as also slashing the rate of withholding tax.
The Justice (rtd) R V Easwar Committee in a 78-page draft report said nearly 65 percent of the personal income-tax collection in India was through tax deducted at source (TDS) and TDS provisions need to be made more tax friendly and not as 'tedious' as they have remained over the years. It recommended "enhancement and rationalisation of the threshold limits and reduction of the rates of TDS.
TDS rates for individuals and HUFs to be reduced to 5 percent as against the present 10 percent". Presently, TDS is applicable on "such tiny annual limits" of Rs 2,500 in case of payment of interest on securities and on interest on NSS accounts, Rs 5,000 for payment of interest on private deposits and commission or brokerage and Rs 10,000 for payment of bank interest.
"Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits," it said. For interest on securities it proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and halving the tax rate to 5 percent.
Similarly, for other interest earnings the limit is recommended to be raised to Rs 15,000 from current Rs 10,000 for bank deposits and Rs 5,000 for others. The panel recommended raising TDS limit for payments to contractors from current limits of 30,000 for single transaction and 75,000 annually to Rs 1 lakh annual limit.
TDS limit on rent income threshold for TDS is proposed to be raised from Rs 1.8 lakh annually to Rs 2.4 lakh. 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 percent.
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.