Easwar panel moots lower TDS rate among new proposals on tax

A committee headed by retired high court judge and former president of the Income Tax Appellate Tribunal, R.V. Easwar, has recently come up with several taxpayer-friendly amendments to the tax laws.

The panel has proposed that the threshold for tax deducted at source (TDS) on interest income be raised from Rs 10,000 a year to Rs 15,000, besides cutting the TDS rate by half from the present 10% to 5%. It has also proposed that non-residents, who do not have a PAN, should not be subjected to a higher TDS of 20% if they submit a Tax Identification Number ( TIN).

The panel also wants that the withholding of refunds for more than six months by the Income Tax Department be disallowed. In fact, the department should pay 1% interest for every month of delay up to six months, and 1.5% per month if the delay is beyond 12 months, it says. “This will prompt the tax administration to put its house in order to settle payment mismatches, if any, expeditiously,” the committee states in the report. Currently, the department pays 0.5% for every month of delay, beyond six months.

Besides, tax refunds should not be adjusted against tax demands, the panel has stated. There should not be a penalty for concealment if the taxpayer has taken a bona fide view of a provision or any judicial verdict. One significant proposal is that income of up to Rs5 lakh a year from equity trading should not be treated as business income, but as short-term capital gain. The tax on shortterm capital gains is levied at 15%, plus surcharge, while business incomes are taxed at a maximum rate of 30%, plus cess.

With no clear distinction between capital gains and business income, a lot of tax cases have piled up in the past. This clarity will help reduce tax litigation. “In cases, where the shares are shown as capital assets and held for one year or less, the assessing officer should not re-haracterise the surplus on sale as business income, provided the surplus in a year is Rs5 lakh or less,” states the report.