IT dept to take steps to boost TDS collections

Buoyed by a steady growth in collections from tax deducted at source (TDS), the Income Tax department now plans to undertake multiple steps to "augment" revenue from this category and minimise tax avoidance.

The department plans to undertake meetings with various stakeholders like company deductors and chartered accountants to ensure that due taxes under this category are deposited accurately and on time.

According to a strategy paper prepared by the department in this regard for financial year 2016-17, the Central Board of Direct Taxes (CBDT) has said work should be done to bolster the figures as TDS is a "non-obtrusive but powerful instrument to prevent tax evasion as well as to expand the tax net." "TDS also minimises tax avoidance by the taxpayer (income earners), as the payee's transaction(s) are reported to the department by a third person. The contribution of TDS to the overall gross direct taxes collections during financial year 2015-16 was Rs 3,25,000 crore (provisional) with a growth of 11.64 percent over an amount of Rs 2,91,096 crore collected during FY 2014-15," it said.

As per official figures, TDS contributes 37 percent to the gross direct taxes collections that "emphasises" its ever-growing importance in the total volume of direct taxes collection in the country.

"The strategy to augment revenue through TDS ought to be a mix of enforcement, capacity-building and leveraging of information that is now available with the department through the Central Processing Centre for TDS," it said.

The department has asked the taxman to also "monitor" both private as well as government sectors to ensure that correct TDS is deducted by the deductors and remitted in the department's coffers in time.

"A full-fledged CPC that works on electronically-fed data will support the taxman in ensuring better TDS collections," a senior IT official said.

The CBDT has instructed the TDS officers to also launch prosecution against the defaulters in "appropriate" cases.

"On the spot verifications, including surveys, reveal that either the deductor has not been deducting the tax at all or has been deducting at low rates. In appropriate cases, initiation of penalty proceeding under Section 271C (penalty for failure to deduct tax at source) of IT Act is warranted to dissuade the deductor from indulging in such exercise that has a direct bearing on tax revenue," it said.