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Assocham urges government to introduce single TDS rate in next budget

Umito November 20, 2024

Industry body Assocham has proposed a uniform TDS rate of 1 per cent or 2 per cent on all payments made to assessed residents, in a bid to reduce disputes arising from interpretation issues and simplify tax compliance. In its pre-budget memorandum to the Finance Ministry, the chamber also advocated for decriminalization of certain TDS defaults.

Assocham president Sanjay Nayar said criminal prosecution should be reserved for cases where taxpayers have enriched themselves at the expense of the government rather than cases where payments or benefits are provided without the application of TDS.

“We expect tax reforms aimed at reducing litigation, facilitating and improving compliance to be part of the Union Budget for 2025-26. Corporate India gives constructive recommendations in this regard. India Inc “is also looking for measures that would stimulate both investment and consumption,” he added.

The chamber also stressed the need for fiscal neutrality in the event of mergers and splits. Currently, tax neutrality is only available for companies carrying out tax-neutral mergers and demergers, but not for crisis trading. Additionally, it calls for extending tax neutrality to Indian resident shareholders of foreign companies involved in mergers or demergers.

“In search of flexibility and ease of compliance, the industry is looking for complete tax neutrality which should be ensured at both the entity and owner level for all forms of entity conversions. This will go a long way in giving businesses the flexibility to choose entity forms that are best suited to them,” noted Deepak Sood, Secretary General, Assocham.

The industry body highlighted existing gaps in provisions relating to capital gains exemptions and loss carry-forwards in the event of mergers, demergers and other corporate reorganizations, such as crisis swaps. and asset sales. It recommended simplifying and expanding these provisions to help companies and investors optimize their operations and holdings without incurring tax liabilities or going through the lengthy NCLT process.

Furthermore, the memorandum suggests that buyout proceeds should be treated as dividends only to the extent that the company executing the buyout has accumulated profits.