To increase liquidity by INR 500 billion (approximately $6.67 billion) for taxpayers during the pandemic, India plans to reduce tax deduction at source (TDS) for nonsalaried specified payments by 25 percent until March 2021.
The measure is part of a COVID-19 relief package worth INR 20 trillion, or approximately 10 percent of India’s GDP, announced May 12 by Prime Minister Narendra Modi.
In a May 13 presentation, Finance Minister Nirmala Sitharaman said that in addition to the TDS reduction, the rates of tax collection at source (TCS) for the specified receipts will be reduced by 25 percent. According to the presentation, the reduced TDS rate will apply to contract payments, professional fees, interest, rent, dividends, commissions, and brokerage income. The TDS and TCS rate deductions will be effective for the remainder of the 2020-2021 financial year.
Bala Krishnan, managing partner at Cogito Ergo Sum Partners, found the measures insufficient, telling Tax Notes that the government "needs to come up with more schemes so that the salaried class, middle-class people, can find liquidity.”
The government also announced it will immediately issue all pending refunds to charitable trusts and noncorporate businesses. This follows the April 8 announcement by the Income Tax Department that up to INR 500,000 in pending corporate and individual income tax refunds would be expedited to provide economic relief to an estimated 1.4 million taxpayers during the pandemic.
India will further extend the due date for income tax returns for the 2019-2020 financial year to November 30. Sitharaman had previously announced an extension until the end of June. Also, the government announced that tax audit dates have been extended to October 31 from September 30, and that it will extend the deadline for making payments under the “Vivad se Vishwas” scheme to December 31.
The government recently proposed relief under the Vivad se Vishwas scheme, a scheme that was introduced in the 2020-2021 budget for taxpayers to settle income tax disputes with India’s tax authorities. On March 24 the government proposed waiving the additional 10 percent levied on dispute payments if they are made by June 30. Under the original proposal, taxpayers who chose to settle their disputes after the March 31 deadline would have had to pay the additional levy on the disputed amount.