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I-T dept open to reducing withholding tax for companies
The income tax department is open to lowering the withholding tax rate for foreign companies which have income in India, a senior official said on Wednesday.
New Delhi: The income tax department is open to lowering the withholding tax rate for foreign companies which have income in India, a senior official said on Wednesday.
Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra also urged firms and MNCs operating in India to pay their due share of taxes and said adequate safeguards have been put in place to ensure that anti-abuse provisions like GAAR are not misused.
He also asked industry experts to come forward with suggestions on withholding tax.
"I would like to be informed in which areas the TDS (tax deducted at source) is high so that we can think of reducing that also. We are absolutely open to any suggestions which can make the life of a genuine taxpayer easy," he said speaking at an International Tax Conference organised by Assocham here.
Foreign entities having income in India as well as domestic companies are required to withhold taxes on any payment to another party and deposit that tax with the government. Companies usually have to withhold taxes interest, royalties or fees paid for technical services.
Assocham Chairman National Council on Direct Taxes Rahul Garg said the tax department issues refunds to the tune of Rs 40,000-60,000 crore every year and hence the industry chamber has suggested a relook of the withholding tax scenario.
"Withholding tax deducted by various segments of business vary somewhere between 1-42 percent. Since the refund quantum is so large, we have suggested the department to analyse the class on investors to whom refund is due every year and reduce the TDS rate for them," Garg said.
Chandra said the General Anti Avoidance Rules (GAAR) will be used in exceptional circumstances and only to ensure that the country gets its due share of taxes.
GAAR will be invoked only if the tax provisions are misused, he said, adding that companies, firms or MNCs should believe in fair taxation.
Chandra said the policies of income tax department have been very transparent and are being decided after considering the concerns of stakeholders.
Under GAAR, which has come into effect from April 2017, the taxmen may potentially want to know whether the transaction was done in the normal course of business or conducted simply with the intention to avoid taxes.