practical tax & investment planning online
international tax expert / colunmist / author / speaker


Strong Protest Needed Against Harsh DTC Provision

Abolishing Declarations For Non Deduction Of TDS!

Manubhai Shah, a senior citizen, is earning interest on his bank deposits of Rs.2,40,000. However, since he is not liable to pay any income-tax on his total income after eligible deductions, he currently enjoys the relief of exemption from TDS by submitting the prescribed Form 15H to the respective banks making interest payments.

But this luxury of TDS exemption may not live long. The new Direct Tax Code to be effective from 1st April, 2012 does not provide for any similar relief and hence Manubhai’s interest receipts of Rs.2,40,000 will have to bear the harsh 10% TDS brunt of Rs.24,000.

TDS Nightmare for Non-Taxpayers!

Currently lakhs of small interest earners, including senior citizens, widows, and even agriculturists, who are not liable to pay income-tax, enjoy respite from the TDS bite by submitting declarations in the prescribed Forms 15G or 15H for no TDS on the ground that their total income does not exceed the prescribed exemption limit. All such persons will now be compelled to initially fill up revenue coffers with such unnecessary TDS and then go through the cumbersome process of filing their tax returns to claim 100% tax refunds.

With the puny threshold limits for TDS on interest prescribed at Rs.10,000 in case of bank deposits and Rs.5,000 in all other cases, just imagine the colossal waste of time, energy and resources of tax deductors, deductees and even the tax department in handling all related procedures of deducting and paying TDS, issuing TDS certificates, filing tax returns for making refund claims and granting them back alongwith interest.

Highly illogical provision bound

to create severe hardships!

The draftsmen of the Code may in defense state that Section 197 providing for granting a certificate for no deduction of tax has been incorporated. But keeping in view the condition prescribed that such a certificate is required to be obtained by the deductee through making an elaborate application to his Assessing Officer, who has been empowered to grant the same if he is satisfied that the total income of the deductee justifies no deduction of tax, in the practical context, it amounts to bearing even more hardships than filing a simple tax return. Moreover, going by the present experience, if several lakhs of such applications infact do come to be made, the departmental machinery may not just be in a position to even handle the huge workload involved!

At one point of time, it was sought to be argued by some officers of the revenue that under the scheme of filing Form 15G and 15H, instances of false declarations being filed had come to notice and hence the same should be discontinued to check any possible abuse. However, a more pragmatic solution to resolve this problem was found with the introduction of the new Section 206AA in the Income-tax Act with effect from 1st April, 2010, requiring the mandatory quoting of PAN in every such declaration, failing which a higher rate of TDS at 20% was provided. Although a similar provision has been prescribed under Section 195(5) of the Code, it is difficult to appreciate the logic of doing away with the prevailing scheme of filing declarations for non-TDS in cases of payment of interest, where such interest income of the payee being below the exemption limit is not chargeable to tax at all.

Mail your protests to the FM

Someone in your family, friends or neighbourhood is bound to be harshly affected by the above harsh and illogical provision as proposed. Send in your voice of strong protest to the Finance Minister via mail to urging him to reinstate in the new Code the current relaxation for filing declarations for non-TDS.

Leave a Reply

Powered by