In a relief to the private individuals, the central government has decided to reduce Tax deduction at source (TDS) and Tax collected Source (TCS) for the running fiscal. Unveiling the details of Rs 20 lakh crore fiscal package announced by PM Modi yesterday, Finance Minister Nirmala Sitharaman said that the government has slashed the TDS and TCS by 25% which is in turn Rs 50,000 crore additional liquidity for the businesses and individuals. The changes will come into effect from tomorrow and will be applicable for the remaining part of the financial year.
Reduction to give cash in hand to businesses and individuals: Sitharaman
In an announcement made during the press conference, Sitharaman said, "The rates of tax deduction at source for non-salaries specified payments made and rates of tax collection at source for the specified receipts shall be reduced by 25 percent of the existing rates". She further added, "We think this measure will release liquidity of Rs 50,000 crore who otherwise would have paid the tax."
Notably, the reduced rate of TDS and TCS will available for payment made for the contract, professional fees, interest, rent, dividend, commission, and brokerage income. Interestingly, TDS is a tax that is paid by the receiver like salary, interest, professional fees, commission, rent, etc. It is charged between 10 percent and 20 percent.
Moreover, the center has also announced to decrease the compulsory provident fund deductions of employees from 12 percent to 10 percent. Sitharaman argued that this would allow individuals to have more cash in hand which would spur demand. However, the deduction for public sector employees and the government will continue at 12 percent.
ITR filing date extended
Further, the government has also deferred the date of all income tax returns for the financial year 2019-20 from 31 July 2020 to 30 November 2020. The final date for tax audits has also been pushed from 30 September 2020 to 31 October 2020. The tax department has been directed to disburse all pending refunds to charitable trusts and non-corporate business professions including proprietorship, partnership, LLP, and cooperatives. People availing Vivad se Vishwas Scheme have also been given time till 31st December without any additional penalty.
