Union Finance Minister Nirmala Sitharaman exhibited a tablet wrapped in a red pouch carrying budget documents, outside the Finance Ministry. (File photo/PTI)
Budget 2025 Expectations: Seeking rationalization of TDS rates, Assocham has in its pre-budget memorandum to the finance ministry pushed for a single/uniform rate of 1% or 2% for all payments made to resident assessees to avoid litigation over interpretation issues and ensure ease of tax compliance. .
Assocham, the Associated Chambers of Commerce and Industry of India, is one of India’s leading trade and industry associations. It serves as a platform for businesses from all sectors to collaborate, share ideas and advocate for policies that promote economic growth and ease of doing business.
Criminalization of TDS default
The suggestions in the presentation on direct taxes also sought criminalization of certain TDS (Tax Deduction at Source) defaults, as the provisions related to this are very serious. It said that Section 276 B provides for imprisonment of up to seven years if a person fails to comply with certain provisions of TDS.
Prohibition of criminal proceedings
“Criminal action should apply only when the taxpayer has enriched himself at the expense of the government, and not in cases where certain payments/benefits are made or provided without incurring TDS. We expect tax reforms aimed at reducing litigation, and facilitating easier and better compliance, to be part of the Union Budget for 2025-26. Corporate India is giving some constructive recommendations in this regard. Assocham president Sanjay Nair said India Inc is also looking for measures that will boost both investment and consumption.
Flexibility in claims and assessments
Changes should be considered to enable taxpayers to make additional claims during assessment proceedings. Similarly, taxpayers should be able to withdraw the claims made in the return at the time of assessment, and such withdrawal should be immune from penalty.
Ease of tax compliance
Ease of tax compliance is one of the critical components of ease of doing business. Assocham’s pre-budget memorandum makes several specific suggestions to the government to rationalize TDS rates and bring in a flexible system of filing tax returns.
Promoting tax neutrality
“In search of flexibility and ease of compliance, the industry is demanding complete tax neutrality that should be provided for all forms of entity conversion at both the entity and owner levels. This will go a long way in providing businesses with the flexibility to choose the entity form that suits them best”, said Assocham Secretary General Deepak Sood.
Simplification of business restructuring tax provisions
Tax neutrality should also be provided for mergers and demergers. Currently, this is only valid for companies and tax-neutral mergers and demergers and not for demerged exchanges. In addition, tax neutrality should be provided to Indian resident shareholders of foreign amalgamated and demerged entities.
Currently, there are gaps in the provisions relating to capital gains exemption or carry forward of losses for mergers, demergers and other forms of business reorganization such as slump exchange/sale. “This can be simplified and expanded, so as to enable businesses and investors to optimize their operations and holdings without facing tax costs and without going through the lengthy process of NCLT,” the memorandum suggested.
Rationalizing the tax treatment of buybacks
It states that the company undertaking the buyback has retained profits to the extent that the proceeds of the buyback are treated as dividends. Equilibrium considerations should enter into the calculation of capital gains such as capital reductions and liquidations. Under the current provisions, the entire income received by a shareholder on a buyback is taxed as a dividend, whether the company has accumulated profits or not.
Union Budget 2025 Date
The final budget is expected to be presented in early February 2025.