Finance minister Arun Jaitley on Monday announced an overhaul of India’s tax deducted at sources (TDS) system, a move that will help cut taxes for small taxpayers, employees, contractors and commission agents.
“To improve the cash flow position of small taxpayers who get their funds blocked due to current TDS provision, I propose to rationalise TDS provisions for Income Tax,” Jaitley said.
This is in line with the recommendations made by RV Easwar-headed panel.
TDS on payment in respect of life insurance policies has been reduced from 2% to 1%. TDS on payments in respect of NSS (National Service Scheme) deposits has been reduced from 20% to 10%, insurance commission will also now have a TDS of 5% from existing 10%. TDS on commission or brokerage has been reduced from 10% to 5%. In case, one has income in respect of units and on payments of compensation on acquisition of capital assets, TDS will been omitted from June 1, 2016.
There has also been a revision in thresholds.
The threshold applicable for TDS in Employees Provident Fund (EPF) has been increased to Rs 50,000 from Rs 30,000. Similarly the TDS threshold for winning in horse race has been increased from Rs 5,000 to Rs 10,000.
TDS will also be applicable on payment to contractors where the aggregate annual limit is of Rs 1,00,000 against the current Rs 75,000. Similarly, the TDS threshold on payment of compensation on acquistion of a certain immovable property has increased from Rs 2,00,000 to Rs 2,50,000; on sale of lottery tickets from Rs 1,000 to Rs 15,000 and on commission or brokerage from Rs 5,000 to Rs 15,000. The threshold has been reduced in case of insurance commission from Rs 20,000 to Rs 15,000.