The Hindu Business Line : India Inc for revamp of TDS system

A SECTION of India Inc has urged the Government to consider restructuring the entire system of tax deducted at source (TDS). It has also sought a review of the varying rates of TDS and different dates of payments in order to minimise harassment to people responsible for such deductions and payments.

According to the Federation of Indian Chambers of Commerce and Industry (FICCI) official, "At times, difficulties and confusion on TDS arises because of various dates of payments and different rates of TDS and issuance of TDS certificates accordingly."

The Budget proposal 2004-05 has stipulated that in case tax is not deducted while making payment or after deduction of tax at source the same has not been deposited within the prescribed time, deduction for such expenditure would not be allowed in the assessment of the payer.

"This provision is similar to the one already existing for disallowance of payments made to non-residents in case tax is not deducted at source," he pointed out.

"There appears to be no justification for disallowance of expenditure for default in TDS as provisions for recovery of tax not deducted as well as provisions for levy of interest, penalty, and prosecution, are already existing and same are quite stringent," the official stated.

Further, though the provision provides for allowance of the expenditure in the year in which tax has been deposited or paid, it is, however, possible that a default may come to light of the payer at a very late stage and by that time assessment of the payee would have already been completed and he would have paid the tax due on his income.

"Therefore, credit for tax paid by the payer would not be available to the payee," the official pointed out.

Since, the payee, in any case, is liable to pay tax on the income received by him, if expenditure is disallowed in the assessment of the payer and he is also made to pay tax thereon, it would amount to payment of double tax on the same amount of income, he said.

In fact, in its memorandum on Budget proposals, the Chamber has submitted that, "the provision may be suitably rewarded to ensure that the assessee is not penalised for non-deductibility of the amount on account of delay in deduction or payment of tax deducted at source for which interest is already charged."

Further, it may be specifically provided that if there were a delay in the payment of TDS, the deduction would be allowed in the year of payment or subsequent year.

Also, where the payee has made the payment of tax, the payer be allowed to claim deduction, the chamber said.

"Similar clarifications be made in the existing provision as well as regarding payments to non-residents."

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