Taxation
Economy & Nation Exclusive
Dispense with TDS certificates and save tax payers from harassment!
The tax authorities can suitably modify the rules to obviate the need for issuing TDS certificates, which will be a great service to the taxpayers in general and tax deductors in particular
 
The harassment caused to the tax deductors by the Income-Tax (I-T) Department preventing them from issuing tax deducted at source (TDS) certificates unless past demands, whether valid or not are paid is explained in the article titled - “Taxtortion: No TDS certificate unless short payment defaults are paid” published in Moneylife.
 
However, the harassment caused to the taxpayers by the system of TDS is so acute that it is a perennial pain in the neck. Though present guidelines stipulate that TDS certificates are required to be issued to the bank depositors every quarter, not a single public sector bank (PSB) complies with this requirement. And the worst part is even at the end of the year, you may have to visit the bank’s branch at least three to four times to get your TDS certificates. And many times, they are either incomplete or do not match with the tax deducted, so much so, many depositors are virtually driven to the wall with no help to solve the problem. 
 
Why TDS certificates are required at all?
 
So my basic question is why do we need TDS certificates at all? As per the present rules, when tax is deducted at source, the deductor is required to issue TDS certificate in a specified format with all sorts of serial numbers and details, which are required to be filled up in the tax returns. But these TDS certificates have neither any sanctity nor any utility for the following reasons. 
 
Even after deducting tax at source, there is no guarantee that such tax deducted has been remitted to the government, as it has happened in the case of some big corporates and the employees have suffered for no fault of theirs. And there are many instances, when the tax deducted does not go into your account simply because the permanent account number (PAN) mentioned while filing the TDS return is wrong due to which it goes to the credit of somebody else. Unless the tax deducted is remitted into government coffers and correctly credited under your PAN, the taxpayer does not get credit for the tax paid and the I-T department simply goes by what is shown in Annual Tax Statement (Form 26AS) available in their website. And the I-T department wants every tax payer to go through the Form 26AS and ensure that the tax paid by them including the TDS matches with what is mentioned therein, as the tax payer can claim credit only for what is shown therein. So what purpose is served by issuing TDS certificate, if the tax deducted is not remitted to the government by the deductor or not correctly credited into your PAN account?  
 
Besides, the TDS certificates have no utility as no attachments are now required to be submitted along with tax returns and hence no useful purpose is served by issuing TDS certificates to the taxpayers. The tax authorities can suitably modify the rules to obviate the need for issuing TDS certificates which will be a great service to the tax payers in general and tax deductors in particular. 
 
However, for the benefit of the taxpayers, banks can be asked to furnish compulsorily in their statement of accounts issued or passbooks written up in the first week of April every year, the details of interest paid and TDS deducted thereon, if any, during the previous financial year by making changes in their computer systems to make it automatic without any manual intervention. This system is followed by some foreign banks and it serves needs of depositors very well and keep the depositors informed about the quantum of interest paid and tax deducted in their account to file their tax returns.  
 
As for the employees of all organizations, it is sufficient if the employer mentions the tax deducted at source during the month and the cumulative total till that month in every pay slip, which itself serves as a record for the employee to file their tax returns. Issuing of TDS certificates is a huge paperwork for large organisations like banks and many information technology (IT) companies, which is very redundant and can be easily dispensed with, without any loss of revenue to the government. 
 
The government should, however, tighten the screw against those who deduct tax at source and fail to remit the amount to the exchequer. If any tax payer finds that the tax deducted is not remitted to the government or not credited to his PAN account correctly, he or she should be encouraged to report to a specialised cell in I-T department, who should take the matter with the concerned deductor with the seriousness it deserves. 
 
I-T dept should facilitate filing of tax returns right from April every year: 
 
There is another distinct advantage for the tax payer if TDS certificates are totally dispensed with. Today you cannot file your return of income unless and until you get the TDS certificates from your bank or your employer,  as you are required to fill up the unique serial number of the TDS certificate in the tax return. Without this the tax return is incomplete and does not get accepted by the computer while filing returns on-line. And banks and companies do not issue these TDS certificates till the last week of May or first week of June, as they can issue these certificates only after they file their quarterly TDS returns with the Income-tax dept., which they can do till 15th of May every year. So a taxpayer cannot file his tax return in April or May, though he is ready to file his return and get rid of his statutory obligation as early as possible, particularly, when he has to receive a refund from the I-T department, as the earlier you file the return, better the chances of getting the refund early. 
 
So dispensing with TDS certificates will be the best thing to do in the interest of tax payers.  Besides, to file your tax returns in April-May every year, it is necessary that the I-T department should notify the tax returns applicable for that year by the end of the previous financial year. It should ensure that all tax deductors file their annual TDS returns with the I-T department by the 15th of April every year, so that the completed Form 26AS is ready in their website by the middle of April to facilitate viewing by taxpayers. 
 
For the financial year ended 31 March 2015 (AY 2015-2016), the I-T department has just a few days back notified an elaborate return, which is held in abeyance as of now at the instance of the Finance Minister, and a revised format is expected to be notified shortly. But the department should ensure that the requirement to fill in the unique numbers of TDS certificates in the I-T return should be suitably deleted if the authorities agree to this suggestion to abolish the present system of issuing of TDS certificates altogether.  If only the income tax department provides the return forms early in April itself, it would hasten the process of filing tax returns well before the due date  and avoid last minute rush as well. Besides this will help taxpayers, especially senior citizens, who wish to complete the work of filing tax returns early in April itself, so that they can leave on long summer vacation to be with their children who may be away in India or abroad.
 
A little bit of empathy and understanding would go a long way in making life easy for the tax payers, who are, in fact, partners in the nation building activity of the government. 
 
(The author is a financial analyst and writes for Moneylife under a pen name ‘Gurpur’.)
 

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COMMENTS

KAIALSH SINGHAL

2 years ago

banks like bank of baroda , silvassa branch says to give letter for interest certificate , bob , sarafa bazar branch did not up loaded tds in 26as after 30 .09.2013 what a funny reason --- pan number was not with them -- then how they make fdr
regards
kc singhal silvassa

Ajay Kumar De

2 years ago

TDS deducted is required to be deposited in account of central government within time provided by law. What happens if any deducts TDS and does not deposit in time ? AS26 is the strongest proof whether deductor deposited or not.
Further, when a senior citizen is exempted from depositing advance tax why banks cann't be restrained from deducting TDS periodically ?
In any case, declaring income or tax evation is assessee's liability for any consequence.

Suketu Shah

2 years ago

One of the best articles you wl read if you are a return filer and tax paer in India.100% correct.

krishna

2 years ago

Nice Expectation. Good suggestions. Will fall on deaf ears.

May not happen practically. TDS is a potent tool for Tax Inspectors , Businesses & CA's. Complexity is necessary for them to prosper.

Why will they let go that ? There is no merit in simplifying tax laws for the administration though it is a strong political tool for capturing votes.

Dr Swamy is one of the many who provided a simple solution of abolishing Personal IT itself. He continues to get good audience but no administrative acceptance or political support.

Honest Tax payers should get practical and work out their own solution than expecting simple things to happen

REPLY

Janakiraman Rajalakshmi

In Reply to krishna 2 years ago

Totally agree with your comments.

Mahesh kumar Aneja

2 years ago

The govt will do a lot of service to tax deducters if TDS issuance certificate obtained from Online system is dispensed with atleast. It is too encumbersome . Billions of people will be benefitted without any loss of revenue
Mahesh aneja

Davidson D

2 years ago

Have a single rate of tax without any exemptions or deductions and deposit tax with uniform rate of say 5% thereby obviating the need of not only TDS certificates, filing of returns and processing of refunds. Huge savings for the govt.

Davidson D

2 years ago

Have a single rate of tax without any exemptions or deductions and deposit tax with uniform rate of say 5% thereby obviating the need of not only TDS certificates, filing of returns and processing of refunds. Huge savings for the govt.

Davidson D

2 years ago

Have a single rate of tax without any exemptions or deductions and deposit tax with uniform rate of say 5% thereby obviating the need of not only TDS certificates, filing of returns and processing of refunds. Huge savings for the govt.

Hemant Kulkarni

2 years ago

Agree with the writer's comments & points. The assumption that every tax payer or assessable individual is a thief leads to "taxtortion". Sadly, an individual who unknowingly or out to lack of knowledge, short pays tds then he's greeted with a penalty notice & dire consequences therefrom. No leniency or sympathy shown towards an individual who has little or no knowledge on tds, which after long being a corporate or finance professionals routine exercise, is now a common man's responsibility too. No auto calculating forms, no ease of interpretation, poor web portals which are down often or inaccessible to nris or simply freeze on the use after he's painstakingly filled out a form such as 26QB. This area of taxation desperately needs to be reformed.

Rajesh Kothari

2 years ago

I've long held that TDS system has become too complicated to of practical use.

Best IAS and IT brains should be involved to replace or abolish it together.

frkhodaiji

2 years ago

Agree with the TDS article.
You may like to consider the flwg.
When a cheque for interest is paid, the TDS certificate should be sent along with the cheque/advice as an attachment.
That may obviate the problem.
Tks for the good work u are doing.
Farrokh Khodaiji.

Mahesh S Bhatt

2 years ago

Sucheta/Debashis I was that there are 84 types of taxes pl check & validate on central/state/municipal taxes.Lesser tax lesser black money.But BJP is spineless its following Congress/US policices & be ready for larger than 2008 financial meltdown.

When million $$ question Mahesh

Anand Vaidya

2 years ago

I think TDS and advance tax itself is highway robbery, especially for ordinary citizens. We are asked to pay tax EVEN BEFORE the income is in our pockets.

But then we are talking about India Gov and ITD. They are worse than robber barons. Modi govt was expected to bring relief but seems useless so far.

TIHARwale

2 years ago

Rules are for donkeys. Vijay Mallya cheated Govt by not remitting TDS by KFA running over Rs 200 crores did he go to jail for cheating and misappropriation NO rather he used the money to own RCB in IPL. So honest travellers who paid service tax for using KFA are bunch of fools and Vijay Mallya was a former M.P. so thatshows the integrity of our M.P.

Shahid Khan

2 years ago

Yes abolish TDS. The Government merely collects 240000 crore through it. Big deal

Chinese Stimulus: Perception v Reality
No one, not even China's leadership are exactly sure of what is going on. With the Chinese economy slowing, the situation will only get worse
 
For the past year, the International Monetary Fund (IMF) has been warning about the risks in China. Certainly the overcapacity and real estate are obvious risks. But what the IMF is missing and which is far more serious are two issues with China. The first is that the economic system in China is Chinese. Specifically it is capitalism with Chinese characteristics. 
 
The second issue is information. It is far worse that the typical asymmetry issues: they have it and you do not. The Chinese government suppresses information. Worse, it has provided large incentives for distorting it. The result is that no one, not even China’s leadership are exactly sure of what is going on. Markets may think they understand the situation. They project their own experience on a reality that might be quite different.
 
Look for example at the numbers for China’s growth. The Chinese announced earlier this month that it had declined to 7%, its worst growth in six years. However, the reported statistic looks strong compared to other estimates. Research groups at Citibank estimated actual quarterly growth could be below 6%, Capital Economics estimated the quarter at 4.9%, the Conference Board’s China Centre thought 4% and finally Lombard Street Research had the lowest estimate at 3.8%.
 
 
It is not hard to point to the reason why China’s growth is slowing. It is slowing because of the same problem that the US had in 2007, the end of a housing boom. Real estate sales have been slowing for more than a year. Prices have fallen for the past six months. The decline has also been accelerating. Prices went down 4.3% in December, a further fall of 5.1% in January and 5.7% in February.  
 
Falling real estate prices are a disaster for any country, but China is not just any country. Its real estate sector makes up 13% of GDP compared to just 3.2% in the US. If you include cement, steel, chemicals and furniture and other industries that affect real estate, the figure rises to 20% a full one fifth of GDP. In addition, prices are some of the highest in the world relative to household income and they have increased some 500% since 2008.
 
Slowing land sales of course have hit developers. The developer Kaisa defaulted $2.8 billion worth of offshore dollar bonds, a small part to the $65 billion dollar bonds loaned to Chinese real estate companies and an even smaller part of the over $5 trillion dollar denominated debt loaned to emerging markets.
 
The real impact will be on local governments in China. As of last count in 2013, Chinese local governments owed about 17 trillion yuan (about $3 trillion) up 67% since 2010. No doubt, it has been growing since then. Some recent estimates put it at 25 trillion yuan. However, local government bonds in China are just like American munis, right? They are backed by taxes. Nope. This is China. Real estate taxes are in the experimental stage. Even the real estate land titles are in doubt. Local governments raised 65% of revenues by selling land. But there is a slight problem, sales of land by local governments declined by 32% so far this year.
 
This bizarre state of affairs occurred because of the way China stimulated its economy. Some governments used taxpayer dollars. The cheapest and most politically palatable method was to get central banks to print vast sums of money. But the Chinese local governments borrowed it from their state owned banks.
 
This worked well until about 2012 when the bad debts started rising. To avoid the problems that occurred in the last recession, the central government allowed the rise of the shadow banking system. And rise it did. It quintupled since 2009.
 
Much of the money raised in the shadow banking system was invested in real estate. As the US Federal Reserve predicted during a meeting in 2008, much of it was wasted. In 2013, about 22.4 % of all homes in urban areas, or 48.98 million units, were lying vacant. But now that real estate is declining where are investors supposed to invest? 
 
The stock market, of course. Much of the money printed by the central banks has found its way into equity markets. Margin lending in the US is at an all-time high, but it is nothing compared to China. Most of the stocks listed on Chinese exchanges are state owned companies. So, a large part of their shares are not available. The real margin-debt ratio in China is at 8.2%.
 
This is potentially an economic catastrophe for the world’s second largest economy, but western markets salivate like Pavlov’s dogs at the mere mention of stimulus. Recently, the People’s Bank of China suggested a program that was ostensibly similar to Europe’s long-term refinancing operation (LTRO) program. Western markets looked on this program along with a cut in reserves for the banks with favour as a form of monetary stimulus. It is not.
 
The reserve cuts most likely will not put any more money into the system. It will either be used to roll over old loans mostly to state owned banks or to make up for the flows of money that have now reversed and are leaving the country. Nor will an LTRO program help. First, banks are balking at buying any new bonds issued by local governments in exchange for debt. The reason is simple. Although the interest rates on the bonds might be lower, their quality is not any better. Recent bond auctions were ‘postponed’. Second, banks have problems finding any quality lenders to take the money. With the Chinese economy slowing, the situation will only get worse.
 
However, markets can react only to what is known and what is known is interpreted according to their own past experience. Although the reality has been quite obvious for some time for anyone interested in looking behind the numbers, when it does come to come to light it will be perceived as a bit of a surprise. Black Swans anyone?
 
 
(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first-hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and speaks four languages.)

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Future Group's retail business to merge with Bharti Retail
Kishore Biyani-promoted Future Retail Ltd.'s board has approved the consolidation and realignment of its retail operations with Bharti Retail Ltd., a statement by the company said here on Monday.
 
"The board of directors of Future Retail Limited, the flagship company of Future Group, and the board of directors of Bharti Retail Limited at their respective meetings held today (Monday) have approved a partnership between the companies," the statement by Future retail said.
 
"To streamline the operations resulting from this consolidation, the board of directors of Future Retail and Bharti Retail have proposed a demerger of the retail business of Future Retail to Bharti Retail and a demerger of the infrastructure business of Bharti Retail to Future Retail," it added.
 
The first entity, to be known as Future Retail Limited (proposed) post the completion of the demerger, will host the retail operations of both the entities.
 
The second entity, to be known as Future Enterprises Limited (proposed) post the completion of the demerger, will host the infrastructure, investments and assets of both the companies, the statement said.
 
After the consolidation, the shareholders of Bharti Retail and Future Retail would be shareholders in each of the entities.
 
The combined entity will have over 570 retail stores in 243 cities with operational retail space of over 18.5 million square feet.
 
Future Group operates over 17 million square feet of retail space in different formats and categories across 166 Indian cities. 
 
Bharti Retail currently operates a network of over 200 Easyday stores in multiple formats across 114 cities with a strong presence in key markets like Punjab, Haryana, National Capital Region, western Uttar Pradesh, Uttarakhand and Bengaluru.
 
The combined entity will operate 203 Big Bazaar and Easyday hypermarkets, 197 Food Bazaar and Easyday supermarkets, and 171 other stores comprising Home Town, eZone, FBB and Foodhall.
 
"Bharti Retail's strengths and network compliment perfectly with that of Future Retail. It will bring us closer to millions of consumers and provide new opportunities for our supply partners," said Kishore Biyani, founder and group chief executive officer, Future Group. 
 
"The operational efficiencies that can be derived from the merger will create significant value for our shareholders."
 
"The partnership offers compelling synergies in terms of reach, efficiency and experience to build a truly world-class retail network to serve the Indian consumer. Retail is emerging as the next big growth engine for India and we will be well positioned to be a major player in this growth story," Rajan Bharti Mittal, vice chairman, Bharti Enterprises, said.
 
At 3.11 p.m. Future Retail's shares were trading at Rs.128.85 per share, up 11.37 percent, in the Bombay Stock Exchange.

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