TDS u/s 194Q: Taxpayers’ Big Relief

TDS u/s 194Q: The introduction of Tax Deducted at Source (TDS) under Section 194Q has been a pivotal development in India’s income tax framework. Recently, taxpayers received some significant relief regarding compliance with this provision, which applies to purchases exceeding Rs.50 lakh. Alongside this, new income tax proposals in India, amendments to income tax rules, and discussions about the share of income tax in total revenue have gained momentum.

Key Highlights of TDS u/s 194Q

What is Section 194Q?

Introduced in the Finance Act 2021, Section 194Q mandates that buyers deduct 0.1% TDS on purchases exceeding Rs.50 lakh in a financial year. This provision applies to:

• Resident buyers engaged in business or profession.
• Transactions involving goods.

Recent Relief for Taxpayers

To reduce compliance burdens, the Central Board of Direct Taxes (CBDT) has issued clarifications:

1. Exclusion of Certain Transactions: TDS under Section 194Q does not apply to imported goods or transactions subject to other TDS provisions.
2. No Double Taxation: Buyers are not liable to deduct TDS if the seller has already reported the transaction under Section 206C(1H).

These clarifications have been welcomed by businesses that struggled with overlapping provisions and unnecessary complexity.

New Income Tax Proposals in India

The Union Budget 2024 introduced several proposals to simplify tax filing and incentivize compliance.

Key Proposals:

1. Increase in Basic Exemption Limit:
   • The basic exemption limit was raised to Rs.3 lakh under the new regime.
   • Encourages more taxpayers to shift to the simplified tax structure.
2. Revised Standard Deduction:
   • The standard deduction increased to Rs.55,000 for salaried individuals.
   • Benefits middle-income taxpayers.
3. Tax Benefits for Senior* Citizens:
   • Higher deduction limits under Section 80D and interest exemptions for senior* citizens.
4. Rationalization of Surcharge:
   • The maximum surcharge rate was reduced from 37% to 25% for incomes above Rs.5 crore.

These proposals aim to enhance disposable incomes and promote economic growth.

New Income Tax Rules from Today

As of the latest update, these new income tax rules have come into effect:

Changes in Tax Filing:

1. AIS Integration:
   The Annual Information Statement (AIS) is now integrated into the Income Tax Portal, enabling taxpayers to access detailed income and transaction data before filing returns.
2. Pre-Filled ITR Forms:
   Improved pre-filled forms include data on dividends, capital gains, and bank interest.
3. E-verification Simplified:
   Taxpayers can now verify returns within minutes using Aadhaar OTP or net banking.

Penalty for Non-Compliance:

Late filers and those failing to link PAN with Aadhaar face higher penalties and restricted access to financial services.

Share of Income Tax in Total Revenue in India

Income tax contributes significantly to India’s total revenue.

Contribution Breakdown:

• Direct Taxes: Approximately 52% of total tax revenue.
• Income Tax (Individuals): Accounts for over 25% of total revenue.
• Corporate Tax: Contributes nearly 27%.

This heavy reliance on income tax underscores its importance in funding public welfare schemes, infrastructure projects, and other developmental initiatives.

Income Tax Payers Percentage in India

India’s tax base has been steadily expanding, but the proportion of taxpayers remains low compared to its population.

Key Statistics:

• Registered Taxpayers: Approximately 8 crore individuals filed returns for FY 2022-23.
• Effective Taxpayers: Only about 5% of India’s population pays income tax.
• Growing Tax Compliance: Initiatives like TDS, AIS, and GST have increased tax transparency and compliance.