After Central Governments announcement of Rs.20 lakh crore Package to boost economy post Lockdown period, TDS Rates are reduced by 25% except TDS on Salaries.
Government has mentioned it as 50,000 crore package. But in my opinion, its can’t be taken as package as there is neither outgo of fund from Government’s Treasury nor tax relief to any businessmen.
This is just a cushion period to pay our taxes. Government was collecting our tax in form of TDS, 25% of which will be collected after few months in the form of advance tax or self assessment tax.
Say , If X has raised a professional fees bill worth Rs.1 lakh to his client Y.
As per Existing Provision, Y has to deduct Rs.10,000 as TDS @10% on Professional Fees and Pay Rs. 90,000 to X. And 10,000 will be paid to Income Tax on behalf of X which will be considered while calculating X’s Tax Liability…
W.e.f. 14th May, 2020…Above calculation will change as below
Y will deduct TDS @7.5% instead of 10%…Hence will deduct 7, 500 and pay Rs. 92,500 to X. So X will get Rs. 2,500 more to use as working capital…But finally when he calculate his Tax Liability, his calculation of liability will be similar as in the existing scenario but he has to pay 2,500 more as TDS deduction is lower than existing scenario…
Therefore , my conclusion is its not a package but just a cushion period for part of our Tax Liability.
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|Atma Nirbhar Bharat: Part-2: Poor, including migrants and farmers||Text of Press Release on 14.05.2020|
|Atma Nirbhar Bharat: Part-3 – Agriculture||Text of FM Press Release on 15.05.2020|