In a bonanza for consultants, brokers, house owners, small depositors, freelancers and all those paying TDS (tax deduction at source) on their income, the tax reforms committee, constituted by the Union government, has recommended 50% cut in TDS rates. It has also recommended a whole range of changes in TDS regime, including a raise in limit of bank interest and brokerage for TDS.In a 90-page report, which will be submitted to the Finance Ministry this week, the committee has instituted TDS reforms as one of the core recommendations for Union Budget 2016. Once endorsed, these recommendations will be incorporated in the coming budget.<!– /11440465/Dna_Article_Middle_300x250_BTF –>Multiple agencies, including third parties, deal in with Rs 41 lakh crore – liable for TDS payment – in a financial year. As many as 17 kinds of transactions are liable for TDS payment.The government has not revised TDS rate for many years. The report, as accessed by dna, has recommended that TDS rate on bank interest and broker’s commission be “reduced from 10% to five” in budget 2016. Over 80% taxpayers will fall in the bracket of average 5% TDS rate.The committee has proposed to raise TDS limit on bank deposit interest from Rs 10,000 to Rs 15,000.It also has a big relief to brokers. Currently, one has to pay 10% TDS on commission or brokerage of Rs 5,000 or above. The committee has suggested that the limit should be Rs 15,000 with 5% TDS.Similarly, National Saving Scheme (NSS) depositors may get a relief. Currently, interest of Rs 2,500 and above earned under NSS deposits attracts TDS. The committee has suggested that the limit be increased to Rs 15,000 and the TDS be reduced from 20% to 5%.Home and building owners will get a relief on rental income. The committee wants the limit of rental income for paying TDS be hiked from the existing Rs 1,80,000 to Rs 2,40,000. This TDS limit should also be applicable to plant, machinery and equipment, it said.The committee has recommended a complete overhauling and even deletion of irrelevant rules of different TDS components. For instance, ‘interest on securities’ have to deleted and should be merged with interest income as a new section (194 A) of Income Tax Act from June 1, 2016.The 10-member committee, headed by retired Delhi high court judge R V Easwar, was set up in November 2015 to simplify the 50-year-old Income Tax law. The other members of the committee are V K Bhasin (former law secretary), Dr Ravi Gupta (senior tax advocate) , Arvind Modi (IRS), Vinay Kumar Singh (IRS), Vinod Jain (chartered accountant), Rajiv Memani, (consultant), Mukesh Patel (chartered accountant), Ajay Bahl (consultant) and Pradip P Shah (investment adviser).Understanding TDSAny income or amount above the permissible limit, paid by a company, comes under TDS ambit. The company is supposed to deduct the tax on behalf of the government. Same is the case with Rs 10,000 and above interest on bank deposits. Here, banks will deduct the TDS and pass it on to the government.PROPOSED MAJOR TDS REFORMSIncome Current Limit Proposed Limit CurrentRate Proposed RateInterest income (Banks) Rs 10,000 Rs 15,000 10% 5%Interest income (Others) Rs 5,000 Rs 15,000 10% 5%Contractors payments Rs75,000 Rs 1,0000 1-2% 1-2%Commission/Brokerage Rs 5,000 Rs 15,000 10% 5%NSS Deposit Rs 2,500 Rs 15,000 20% 5%professn/tech fees Rs 30,000 Rs 50,000 10% 10%

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Your TDS may come down by 50% if Centre accepts panel report