Entities with low TDS deduction on radar of tax department

Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra has requested field officials to examine firms and individuals who have reported fall in tax deducted at source (TDS) of more than 10 percent during the first half of the fiscal year, reports Business Standard.

The direction came as the government sets a steep direct tax collection target for the current financial year. Direct tax collection for the first half grew by 10.4 percent due to a slowdown in the economy compared to the last year growth of 17 percent for the same period.

The tax department is worried that the target set is difficult to achieve in view of the slowing economic growth and the tax collection stands at little over Rs 1.95 lakh crore for the year.

CBDT Chairman Chandra told the newspaper that some parts of the country are showing low or negative tax collections. The department is looking into cases where entities have collected TDS but not deposited them and instances of large-scale non-deduction of TDS.

The report said 45 percent of direct tax comes from advance tax, 35 percent from TDS, 10 percent from self-assessment and 10 percent from recovery.

Tax officials are concerned that the second half may be more painful in view of muted economic outlook and a reduction in tax rate for annual income between Rs 2.5 lakh to Rs 5 lakh at 5 percent from 10 percent last year.