ASSOCHAM has called for the rationalization of TDS rates, proposing a uniform rate of either 1% or 2% for all payments made to resident assessees. This initiative aims to mitigate litigation arising from interpretational discrepancies and to facilitate smoother tax compliance. It also recommended the decriminalization of certain TDS defaults, highlighting the stringent nature of existing provisions. It pointed out that Section 276 B imposes a penalty of imprisonment for up to 7 years for individuals who fail to comply with specific TDS regulations.
ASSOCHAM proposed that regulations be simplified and broadened to allow businesses and investors to optimize their operations and holdings without incurring tax liabilities or navigating the protracted NCLT process. It was also recommended that buyback proceeds be classified as dividends only to the extent that the company executing the buyback has accumulated profits. Any remaining consideration should be included in the capital gains calculation, akin to capital reductions and liquidations. Under existing regulations, all proceeds received by a shareholder from a buyback are taxed as dividends, irrespective of the company’s accumulated profits.