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TDS rate cut on salaries would have increased tax compliance burden: Official
May, 18th 2020

To improve liquidity in the hands of taxpayers, finance minister Nirmala Sitharaman has reduced rate of tax deducted at source (TDS) and tax collected at source (TCS) by 25% but salaries have been kept out of the purview of relief.

Finance Secretary Ajay Bhushan Pandey has issued a clarification explaining how a TDS rate cut would have lead to more trouble for the salaried class. He said TDS is deducted from salary after taking into account various eligible deductions like 80C and others of the salaried person.

"If we reduced the TDS rate for salaried class then their compliance burden would have increased because they would be required to pay higher taxes at the year end along with interest. Hence TDS rate has not been cut for salaried class," Bhushan said. This, he said, has been done to ensure that salaried individual do not have to bear the burden of paying high taxes at the year end and also the interest burden.

Similarly, cash withdrawals and foreign remittances have also been kept out of the rate reduction ambit to promote digital transactions and restrict larger outflow of money.

The Central Board of Direct Taxes (CBDT) has already notified revised TDS and TCS rates that will be applicable from 14 May to 31 March. Tax deducted or collected at source on payment of dividend, insurance policy, rent, professional fee and on the acquisition of immovable property has been cut by 25% to provide more money into the hands of taxpayers to deal with the economic situation amid the Covid-19 pandemic.

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