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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
First Report of Easwar Panel on Review of Income Tax Law
Jan 21, 2016

A high level panel on simplification of Income Tax laws recommended raising the threshold limits for deduction of tax at source (TDS) as also slashing the rate of withholding tax. The Justice (rtd) R.V. Easwar Committee in a draft report said nearly 65 per cent of the personal income-tax collection in India was through tax deducted at source (TDS) and TDS provisions need to be made more tax-friendly and not as 'tedious' as they have remained over the years.

  • It recommended, enhancement and rationalisation of the threshold limits and reduction of the rates of TDS. TDS rates for individuals and HUFs to be reduced to 5 per cent as against the present 10 per cent. 

  • Presently, TDS is applicable on such tiny annual limits of Rs 2,500 in case of payment of interest on securities and on interest on NSS accounts, Rs 5,000 for payment of interest on private deposits and commission or brokerage and Rs 10,000 for payment of bank interest.

  • Considering the importance of the long overdue revision of these small limits, the Committee has recommended suitable hikes in such threshold limits. For interest on securities it proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and halving the tax rate to 5 per cent.  Similarly, for other interest earnings the limit is recommended to be raised to Rs 15,000 from current Rs 10,000 for bank deposits and Rs 5,000 for others.

  • The panel recommended raising TDS limit for payments to contractors from current limits of 30,000 for single transaction and 75,000 annually to Rs 1 lakh annual limit. 

  • TDS limit on rent income threshold for TDS is proposed to be raised from Rs 1.8 lakh annually to Rs 2.4 lakh. 

  • The threshold for fees for professional or technical services is recommended to be raised to Rs 50,000 from Rs 30,000 but TDS rate is proposed to be retained at 10 per cent. 

  • The committee has clarified that dividend income on which dividend distribution tax has been levied should be treated as part of total income.

  • It also sought to provide an exemption to non-residents not having a Permanent Account Number (PAN), but who furnish their Tax Identification Number (TIN), from the applicability of TDS at a higher rate.

  • The draft report of the 10-member committee contains 27 suggestions for amendments under the I-T Act and eight for reform through administrative instructions. 

Background: The government had set up a committee under a former Delhi High Court judge to review the income tax law and identify clauses that lead to litigations or adversely impact the ease of doing business, underlining its resolve to address all tax related issues. The main idea behind setting up the panel was to make the I-T Act taxpayer friendly.

In a four-point terms of reference, the government had asked the committee to study and identify the provisions/phrases in the Act which are leading to litigation due to different interpretations, those impacting the ease of doing business, and areas and provisions of the Act that need to be simplified.

The government wanted the committee to suggest alternatives and modifications to the existing provisions and areas so identified to bring about predictability and certainty in tax laws without substantial impact on the tax base and revenue collection.

The committee can give its recommendations in batches. The 10-member panel, headed by Justice R.V. Easwar was expected to give its first set of recommendations by January 2016 and tax-payers can expect to see certain measures in the next budget to further streamline the tax laws. 

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