CII for modifications in corporate TDS

New Delhi, Feb 8 (UNI) Despite several modifications being made in the provisions of tax deducted at source (TDS) for the corporate sector in last few years, there is a large scope for further improvement in the same, industry body CII said today.

The confederation hoped that the Finance Minister would address the issue in this year's Budget.

According to the chamber, there are a number of provisions of TDS, which need to be rationalised under one single section by consolidating the various sections, such as stipulations, rates for TDS exemption limits, etc.

CII further observed that tax authorities under section 195, take a conservative view, resulting in blocking of money in TDS of non-resident contractors due to excessively high estimate of profits.

Excess amounts are refunded only on filing of tax return along with the claim of refund. To avoid hardships to non-resident taxpayers, CII has sought framing of clear guidelines for deduction of out of contract payments.

It has also suggested that short or excess deduction of income tax under section 192 in a financial year out of various employees should be allowed to be adjusted by the employer so as to obviate the need for employees to make claim for refund.

CII has also stressed the need for rationalising TDS on data communication. The income tax department is of the view that the payments to international service providers for down-linking signals from the satellites over the ocean to the US are subject to deduction of tax under section 195 of the Income Tax Act -- this being regarded as a technical service.

The body is of the opinion that provision of bandwidth is a utility facility, and hence should not be considered as a technical service. Hence, payment made to foreign companies for data communications should not be covered under 'Fees for Technical Services' and accordingly should be out of the purview of section 195.

In order to reduce the cost of software to the Indian users, CII feels that license payments made for use of software for the payer's own operations (as against duplication for onward sale/ license) should be outside the ambit of the definition of royalty, and hence not liable to TDS.

Tax authorities are interpreting the royalty definition in tax treaties to include software license payments as well, even where such payments are for use of software for the payer's own operation, and not for further duplication and sale/ license.

TDS compliance for the banks also needs to be simplified, according to CII.

UNI