Finance Minister Nirmala Sitharaman has announced a series of direct tax measures as part of the Covid-19 relief package. Prime Minister Narendra Modi had previously promised an economic package focusing on land, labour, law, and liquidity to boost the country's economy.
Rakesh Nangia, chairman at Nangia Andersen Consulting, said that the measures announced today will bring huge relief to companies and will play a crucial role in increasing cash flows as beneficial prices will be available until the end of the current fiscal year. "This, along with the release of the outstanding refunds of all non-corporate taxpayers, would accelerate the revival of companies and companies," he said.
These are the main measures announced by the Finance Minister:
TDS/TCS Rate Reduction
- A 25 percent reduction in current tax rates deducted at source for specific nonsalary payments that are made to residents.
- The rate for tax collection for specific receipts has been reduced by 25 percent.
- Payment of transactions such as contracts, professional fees, interest, rents, profits, commissions, and brokerage will be eligible for reduced TDS rates. This will be applied until the end of the fiscal year.
- Reduction in rates of TDS and TCS rates will result in a release of liquidity of Rs 50,000 crore, according to government estimates.
Rohinton Sidhwa, Deloitte India, said the tax department will still receive many requests under section 197 of the Income Tax Law to allow for a lower discount. He explained that if the profitability of the company was expected to remain low, then the total amount paid in the form of taxes would also below, so the evaluators would have asked the revenue department to have a lower withholding rate.
"This is a welcome relief and will reduce the administrative burden," Sidhwa said.
Revised TDS rates
The government has notified some reviews of the TDS rates for the period from May 15, 2020, to March 31, 2021:
- TDS on dividend payment by mutual funds, interest on securities, dividends, and interest under section 194a, commission, and brokerage, as well as rent on the immovable property, has been reduced to 7.5 percent instead of the current 10 percent.
- TDS on e-commerce participants, payments to buy immovable property has been reduced to 0.75 percent compared to the existing 1 percent.
- TDS rate for payments made to contractors and subcontractors by an undivided Hindu family or any other company has been reduced to 0.75 and 1.5 percent, respectively.
Due Dates Extended
- The due date for all income tax returns for the fiscal year 2019-20 has been extended from July 31 and from October 31 to November 30.
- The tax audit due date has been extended from September 30 to October 31.
- The date of assessments getting barred on Sept. 30 has been extended to Dec. 31. Similarly, assessments getting barred on March 31, 2021, are extended till the end of September 2021.
- The window for making payments under the "Vivaad se Vishwas Scheme", Tax Dispute Resolution Mechanism, has been extended without any additional amount, till December 31.
Finally, the government will immediately issue outstanding income tax refunds to charities and non-corporations such as individual companies, limited liability companies, and cooperatives.
Also Read: Govt to immediately release pending income tax refunds up to Rs 5 lakh