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Written by 9:56 am Manufacturing Trends

ASSOCHAM proposes simplified TDS rates and tax reforms in pre-budget 2025-26 recommendations, ETCFO

The Associated Chambers of Commerce & Industry of India (ASSOCHAM) in its pre-Budget memorandum to the Finance Ministry, proposed a streamlined approach to Tax Deduction at Source (TDS) for the upcoming Union Budget 2025-26.

The industry body recommends a unified TDS rate of 1% or 2% for all payments to resident taxpayers, aiming to minimize litigation over interpretation and enhance tax compliance.

ASSOCHAM has also advocated for decriminalising certain TDS defaults, emphasising that stringent penalties under Section 276 B, which includes imprisonment of up to seven years—should only apply in cases where there is clear tax evasion.

“Criminal proceedings should apply only when the taxpayer has enriched himself at the expense of the Government, and not to cases where certain payments / benefits are made or provided without applying TDS. We expect tax reforms aimed at reducing litigation, easy and better compliance to be part of the Union Budget for 2025-26. Corporate India is giving some constructive recommendations in this regard. India Inc is also looking for measures which would boost both investment and consumption,” said Sanjay Nayar, President of ASSOCHAM.

The recommendations also suggest for modifications to the tax assessment process, proposing that taxpayers be allowed to make additional claims or withdraw existing claims during assessments without facing penalties. Such flexibility, it argues, would be a significant step toward simplifying compliance and enhancing the Ease of Doing Business.

Deepak Sood, Secretary General of ASSOCHAM, emphasised the need for “full tax neutrality” saying, “Seeking flexibility and ease of compliance, the industry is seeking full tax neutrality which should be provided at both the entity and owner levels for all forms of entity conversions. This will go a long way in providing flexibility to businesses to choose entity forms that are most suited to them.”

In the context of corporate buybacks, ASSOCHAM proposed that buyback proceeds should only be taxed as dividends if the company has accumulated profits. Any remaining proceeds should be treated as capital gains, similar to capital reductions or liquidations, instead of the current practice of taxing the entire buyback amount as dividends.

  • Published On Nov 19, 2024 at 03:16 PM IST

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