In a big update for taxpayers, the government is trying to link TCS (tax collected at source) with TDS (tax deducted at source), Chief Economic Advisor (CEA) V Anantha Nageswaran has revealed. According to him, the plan once implemented will help in ensuring that cash flows of individual taxpayers are not affected.
Simply put, with this TCS and TDS linkage a salaried individual’s TDS will automatically come down if he or she has to pay tax TCS on foreign transactions.
TCS is the additional amount collected as tax by a seller at the time of sale of goods or services, while Tax Deducted at Source (TDS) is the amount levied as tax by the government.
At a CII event on Thursday, Nageswaran also threw some light on the government’s decision to raise the rate of TCS that would be levied on international transactions.
In the recent budget, the government had announced that the rate of TCS applicable on most foreign transactions would be hiked to 20 percent from the previous 5 percent from July 1.
The news of the Centre trying to link TCS with TDS has come at a time when a 20 percent Tax Collection at Source (TCS) is coming into effect from July 1 on certain international spends.
Transactions up to Rs 7 lakh have been exempted from the TCS, providing relief to small taxpayers. So, bulk of the transactions made by most will not be covered under 20 per cent TCS, the CEA noted.
Defending the government decision, he said, “And it (government) also attempts to link the TCS with your TDS such that if there are TCS payment made by you it has to reflect a lower TDS. Such that it simply is a matter of making sure that you are not affected from a cash flow perspective.” The CEA was quoted as saying in a PTI report.
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It will also provide a huge amount of relief for people who are concerned about this annoyance or irritation of seeing this TCS apart from TDS, he said.
The 20 percent TCS on international credit card spends is to come into force from July 1. Facing backlash, the finance ministry last week, exempted up to Rs 7 lakh spend from the TCS ambit.
“The exemption was done… The pass through of TCS into TDS deduction will also make sure that ordinary taxpayers do not see impact as far as they are concerned,” he said.
