The Associated Chambers of Commerce and Industry of India or ASSOCHAM, in its pre-Budget memorandum to the Finance Ministry, has sought rationalisation of TDS rates, pressing for a uniform rate of 1 or 2 percent for all payments made to resident assesses. This would help avoid litigation on interpretational issues and ensure ease of tax compliance, the trading body said.
In a pre-Budget memorandum to the finance ministry, the industry chamber also made a case for decriminalisation of certain TDS (Tax Deducted at Source) defaults, “as the provisions relating to the same are quite severe in nature”.
It said Section 276 B provides for imprisonment up to seven years if a person fails to ensure compliance with some of the TDS provisions.
“Criminal proceedings should apply only when the taxpayer has enriched himself at the expense of the government, and not to cases where certain payments/benefits are made or provided without applying TDS,” said Assocham President Sanjay Nayar.
“We expect tax reforms aimed at reducing litigation, easy and better compliance to be part of the Union Budget for 2025-26. Corporate India is giving some constructive recommendations in this regard. India Inc is also looking for measures that would boost both investment and consumption,” he added.
The chamber further stressed that tax neutrality should also be provided for amalgamation and demergers. At present, this is allowed only for companies and tax-neutral mergers and demergers and not for slump exchanges. Besides, tax neutrality should be provided to Indian resident shareholders of foreign amalgamating and demerged entities, ASSOCHAM said.
"Seeking flexibility and ease of compliance, the industry is seeking full tax neutrality which should be provided at both the entity and owner levels for all forms of entity conversions. This will go a long way in providing flexibility to businesses to choose entity forms that are most suited to them," said Deepak Sood, Secretary General, Assocham.
Currently, there are gaps in the provisions relating to capital gains exemptions or carry forward of losses for amalgamations, demergers and other forms of business reorganisations like slump exchange/ sale, the industry body said. These, they added, can be simplified and expanded, to enable businesses and investors to optimise their operations and holdings without facing tax costs and without going through the lengthy process of NCLT.
In the pre-Budget memorandum to the government, the industry body also recommended that buyback proceeds be treated as dividends only to the extent the company undertaking the buyback possesses accumulated profits.
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