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Budget 2012: Finance panel for less tedious TDS for senior citizens
March, 06th 2012

Non-residents and senior citizens could be in for some tax relief if the government accepts the recommendations of parliament's standing committee on finance that has proposed a less burdensome tax deduction at source, or TDS.

In its recommendations on the direct taxes code, or DTC, the committee has suggested that there should not be any TDS on interest earnings of senior citizens from their fixed deposit investments. "We want tax deduction at source regime to be less tedious," said a member of the panel. The panel is expected to submit its report in a week's time.

The former finance minister Yashwant Sinha headed panel has also suggested that a non-resident should not face any TDS if his income does not accrue in India.

If accepted, the provisions will reduce the administrative burden on these taxpayers.

At present, 10% tax is deducted at source on interest income in excess of Rs 10,000 per annum. Senior citizens can, however, submit a special form called Form 15H and to prevent deduction if they have no taxable income.

If they fail to submit this form then they have to claim a refund after filing a return.

Though, the present tax regime provides for relief the DTC Bill does not have explicit provisions for it.

Senior citizens enjoy a basic tax exemption on annual income of upto Rs 2.40 lakh. "The idea to maintain continuity and ensure that there is no harassment," the person told ET.

The nearly 50-year old income tax act says clearly that income cannot be chargeable to tax in India if it does not accrue here in case of non-residents.

But the DTC overrides the provisions under double taxation avoidance agreements if the tax authorities feel that income had accrued in India. The provision was specifically brought in to prevent any abuse of the treaty provisions that caused loss of revenue.

The panel wants a specific provision in the code to clear this uncertainty.

Tax experts also favour an explicit provision in the law. "These benefits are available under present law and these should be carried into the DTC as well," said Amitabh Singh, partner, Ernst & Young.

Tax authorities maintain that these clarifications could come in the rules and the code need not be burdened with these provisions.

The TDS is considered a neat and nopn-intrusive way of collecting tax. It can be adjusted against a taxpayer's actual tax liability later and if there is no liability taxpayer can avail a refund.

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