Budget 2016 implementation of Easwar’s TDS Reforms on Life Insurance

The minister proposed that the tax deductible at source in life insurance policies be reduced from the earlier 2 per cent to 1 per cent. This was among a host of other reforms on TDS that were proposed. Reforms in TDS will go a long way in simplifying tax compliance to the market as envisioned by the Easwar Panel.

Mar 21, 2016 10:03 IST India Infoline News Service Neha Gupta |

In line with the finance minister’s earlier statement on the budget theme, tax reforms to reduce compliance burden for taxpayers have been kickstarted. The minister proposed that the tax deductible at source in life insurance policies be reduced from the earlier 2 per cent to 1 per cent. This was among a host of other reforms on TDS that were proposed. In a move aimed at improving cash flow position for small taxpayers (individuals and small businesses) by lowering the TDS burden of small policyholders and was in line with the recommendations made by the panel headed by RV Easwar.
 
Other Proposed Rationalizations to TDS include:
  • A halving of TDS on payments in respect of NSS (National Service Scheme) deposits from the current from 20percent to 10 percent.
  • Reduction of TDS on insurance commission to 5% from existing 10%.
  • Brokerage commission has also been reduced from 10% to 5%
  • An exemption from TDS (from June 1, 2016) for those who draw incomes in respect of units, on compensation payments and on the acquisition of capital assets.
  • By taking these moves, the finance minister stuck to one of his nine pre-budget core pillars of initiating tax reforms.
A revision of Different TDS Thresholds to reflect the same principles were also proposed as follows:
  • TDS in Employees Provident Fund (EPF) was raised to Rs 50,000 from Rs 30,000.
  • TDS threshold was raised from Rs 5,000 to Rs 10,000 with respect to winning in a horse race.
  • To reduce compliance burden to smaller firms, TDS applicable on payment to contractors was raised from where the aggregate annual limit of Rs 75,000 to Rs 1,00,000.
  • The TDS threshold applicable to the payment of compensation upon the acquirement of certain immovable property was increased from Rs 2,00,000 to Rs 2,50,000; on brokerage commission revised from Rs 5,000 to Rs 15,000, and on lottery tickets’ sale to Rs 15,000 up from Rs 1,000.
  • A reduction in the threshold was proposed in the case of insurance commission from Rs 20,000 to Rs 15,000.
These reforms in TDS will go a long way in simplifying tax compliance to the market as envisioned by the Easwar Panel.

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