To provide more money into the taxpayers' hands, the government, here on Wednesday, reduced the TDS (tax deduction at source) rates for non-salaried specified payments made to residents, and the TCS (tax collection at source) rates by 25 per cent for the specified receipts.
Making the announcement, Finance Minister Nirmala Sitharaman said the move would release Rs 50,000 crore liquidity during the Covid-19 pandemic that had affected all spectrum of the economy.
"The reduction in the rate for withholding taxes and for the TCS is indeed welcome. It will provide additional liquidity in the hands of individuals and will, therefore, spur demand," said Dinesh Kanabar, CEO, Dhruva Advisors.
"While the 25 per cent reduction in the current rate is welcome, there's need to expeditiously issue lower rate certificates, where applied for by taxpayers," he said.
As per the announcement, the reduced TDS rate will be applicable to the payment for contract, professional fees, interest, rent, dividend, commission and brokerage. It will be applicable for the remaining part of FY21 -- from May 14 to March 31, 2021.
"The 25 per cent reduction in TDS/TCS rates for all non-salaried payments is useful as it would put that much more cash in the hands of recipients of those payments and that's the whole purpose of the package," said Daksha Baxi, Head-International Taxation, Cyril Amarchand Mangaldas.