For benefit of revenue collection and easy administration: ADVANCE TAX IS BETTER OPTION THAN TDS / TCS.

[CA DEV KUMAR KOTHARI]

Earlier article:

Budget suggestions for benefit of revenue: Prefer more advance tax in comparison to TDS REDUCE T.D.S. RATES WITH LOWER EFFECTIVE TAX RATES. An Article By: - C.A. DEV KUMAR KOTHARI December 22, 2011

LEARNING FOR REVENUE FROM RECENT RULING - RECEIVER NOT TO ESTABLISH PAYMENT BY SUPPLIER OR SERVICE PROVIDER SO FINAL COLLECTION OF TAX IS PREFERABLE. An Article By: - CA DEV KUMAR KOTHARI December 2, 2013.

And some other articles on similar subjects like first collect then refund is not good policy.

Advance tax is for benefit of revenue and better option for Government:

As briefed hereafter, in this article collection of tax by way of advance tax instead of TDS/TCS will be  beneficial for the Government for the following broad reasons:

Early collection- first instalment of not less than 15% of estimated tax for entire previous year from regular income (subject to some exceptions), fall on 74^th  or 75^{th ( in case of leap year once in four years)}  day  that is on 15^th June of previous year itself, from beginning of previous year on 1^st April. This is expected to be much earlier than collection by way of TDS/TCS due to monthly or quarterly payments. And many payments in last month of March of previous year.

Advance tax shall be paid by tax payers after reasonably estimating income for the year. 

The work of tax collection will be easier.

There will be less refunds and less payment of interest.

There is likely to be more collection of interest due to delay and / or deferment of advance tax. Even for income earned in last month of previous year which was not considered in instalment by taxpayer while paying first instalment can be subject to interest payable by tax payer.

Tax payer’s base has improved:

Due to mandatory PAN requirement in many situations in which income is likely to be liable to tax, tax payer’s base , ROI filers base, and data base of PAN holders have increased. There is collection of information about potential tax payers. Therefore, TDS/TCS  have lost most of its importance, as tool for tax collection and improving tax payers base.

Therefore, in case of tax payers who are regularly filing ITR- TDS / TCS should be exempted from deduction and collection of tax and advance tax payment should be monitored in better way.

Persons who receive specified sums above specified limits, but have no PAN should only be liable to face TDS/ TCS from concerned person.

For example, Government can also learn with experience of tax on dividend, earlier it was by way of TDS and refund involving lot of work for tax department and dividend paying companies. Whereas after dividend distribution tax final tax is collected. Some more incomes can be brought into category for ‘final tax collection’ at reasonable rates for easy of dong work for all.

Implementation of above suggestions will go a big way to benefit the revenue and will also make work of tax payers and tax department easy.

TDS AND TCS since earlier article:

In provisions relating to TDS and TCS there have been some changes in rates and some new items have been covered for TDS/ TCS.

There has also been reduction in tax rates or net tax payable by way of tax rebate and in some cases there is increase in tax liability.

From 01.06.2016 provision has been amended for payment of advance tax in four instalments in all cases ( except some exceptions) as was the case of companies. Earlier Individuals , HUF, BOI, AOP , firms etc. were required to pay advance tax in three instalments.

Now since 01.06.2016 first instalment of not less than 15% of estimated tax is payable on 15^th June. This is within 74 or 75 days (in leap year) from beginning of FY on 1^st first April.

In case of delay in deposit of advance tax instalment, interest is payable by assesse.

Likely amount of TDS/ TCS, even if deposited after close of previous year that is after 31^st March, as per law, is adjustable against even first instalment of advance tax beginning on 15^th June.

It is also fact that a significant portion of TDS / TCS becomes payable after close of financial year due to year ending payments or credits.

 As these aspects are well known to readers and visitors of this website, these are not elaborated for sake of brevity. Readers can refer to provisions applicable for concerned year on the website.

TDS/ TCS is better option and beneficial for taxpayers:

As discussed in earlier articles and briefed above, author find that as per present legal position, TDS/ TCS are in favour of and beneficial of tax payers. Therefore, author advises taxpayers to increase scope and  amount of TDS/TCS if possible so that liability of advance tax can be reduced. In case of persons liable to pay advance tax  and also have incomes subject to TDS/ TCS author suggest that do not obtain certificate for lower TDS.

 TDS/ TCS , even if made in last month will give advantage of payee/ recipient of income.

In this regard, position remain similar today as well as was discussed in earlier articles.

 

Budget suggestions for benefit of revenue: Prefer more advance tax in comparison to TDS REDUCE T.D.S. RATES WITH LOWER EFFECTIVE TAX RATES. An Article By: - C.A. DEV KUMAR KOTHARI December 22, 2011

LEARNING FOR REVENUE FROM RECENT RULING - RECEIVER NOT TO ESTABLISH PAYMENT BY SUPPLIER OR SERVICE PROVIDER SO FINAL COLLECTION OF TAX IS PREFERABLE. An Article By: - CA DEV KUMAR KOTHARI December 2, 2013.