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Monday, March 12, 2012

TDS threshold limit to rise

Government is mulling over raising the threshold limit of TDS (tax deduction at source) deduction on interest received (or accrued) on fixed deposits in a financial year. Presently TDS is deducted on accrued interest over Rs. 10,000 in a financial year. This was really harassment for investors with sole source of income from fixed deposits.
 Mr. Sinha had gross annual income of Rs. 2,00,000 per years from fixed deposits only  and he  ended up with a deduction of Rs. 20,000.
But let’s check what his tax liability was!
As the income tax exemption limit is Rs. 1,80,000, so tax @ 10 % is calculated on an income of Rs. 20,000 only, which comes as Rs. 2,060 only.
Just for a tax liability of Rs. 2060, a deduction of Rs. 20,000 was not at all justified.
There has been lot of complaints from income tax payee’s  who did not get the IT refund in time. Some people shall argue that Mr. Sinha  could have filled the form 15 g .

But wait, the eligibility of furnishing 15 g is only for individuals whose income fall below the minimum tax exemption limit i.e. income below Rs. 1,80,000.
Mr. Sinha being a law abiding person could never fill the form 15 g.

Foe people like Mr. Sinha,I had discussed in my earlier post, what Mr. Sinha could have done to avoid this hefty tax deduction at source.

Raising the threshold limit was much awaited decision and government is supposed to raise this limit to Rs. 30,000.
This move is praiseworthy and shall bring more money into the banking channel. Earlier there was a clause under section 80 L which gave some relief to IT payee’s on interest received but with discontinuation of that things worsened.


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