As the Union Budget 2025-26 approaches, there is growing interest in efforts to simplify India's tax system.
Reetu | Jan 6, 2025 |
Budget 2025-26: Will Finance Minister Simplify TDS and TCS to reduce Taxpayer Concerns?
As the Union Budget 2025-26 approaches, there is growing interest in efforts to simplify India’s tax system. Industry leaders, notably the Federation of Indian Chambers of Commerce and Industry (FICCI), have made suggestions to Finance Minister Nirmala Sitharaman to simplify tax compliance and decrease administrative difficulties for businesses and individuals.
One of FICCI’s primary recommendations is to streamline the TDS and TCS regimes. The plan proposes for reducing the multiple TDS and TCS rates to two or three categories, which could help reduce uncertainty over tax classification and disputes.
Experts feel that a streamlined system would promote compliance while reducing the administrative load on taxpayers. According to a survey, there is substantial support for simpler Individual Tax Returns (ITRs), straightforward tax incentive computations, and a unified TDS structure based on the premise of “one rate, one section.”
Additionally, tax policy experts have proposed removing Form 16A because the necessary TDS information is already available in Form 26AS and Annual Information Statements (AIS). This change may make compliance easier for firms and individuals.
Previously, the government took attempts to simplify the tax structure. In Budget 2024, the TDS rate on rents greater than Rs 50,000 was lowered from 5% to 2%. Furthermore, buyers of properties worth more than Rs.50 lakh are now only required to deduct TDS on the amount beyond this threshold, simplifying the process regardless of the number of sellers.
Another reform permitted parents to claim TCS based on their minor children’s income, making the system more family-friendly. Beginning in October 2024, employers must take TDS/TCS deductions on non-salary income into account when calculating salary tax, reducing instances of double taxation.
TDS software updated in December 2024 ensured more accurate TDS calculations for the fourth quarter of financial year 2024-25.
With the Union Budget 2025-26 just a few weeks away, taxpayers and business stakeholders are hoping for more bold reforms to take place. The TDS-TCS system is intended to be simplified, which will improve compliance, minimise financial stress, and boost taxpayer confidence.
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