Budget 2024: FM simplifies taxation rules for charities and TDS on mutual funds or UTI unit purchases

The Finance Bill is initiating simplifications in the tax regime for charities, the structure of tax deducted at source (TDS) rates, reassessment provisions, search provisions, and capital gains taxation. Currently, there are two distinct tax exemption frameworks for charities in India. Consolidating them could streamline the process for charitable organizations and foster increased donations.

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Simplification of processes for charities and TDS

The proposal includes merging the two tax exemption regimes for charities into a single framework. It also involves consolidating the 5% TDS rate on many payments into a 2% rate and eliminating the 20% TDS rate on mutual funds or UTI unit repurchases. Additionally, there’s a plan to reduce the TDS rate on e-commerce operators from 1% to 0.1%. Furthermore, it suggests allowing credit of TCS against TDS deducted from salaries. The proposal also seeks to decriminalize delays in TDS payment up to the filing deadline for the statement. Moreover, there are plans to establish a standard operating procedure for TDS defaults and simplify the compounding guidelines for such defaults.

Simplifying the process of reassessment

The Finance Minister, Nirmala Sitharaman, said, “I propose to thoroughly simplify the provisions for reopening and reassessment. An assessment hereinafter can be reopened beyond three years from the end of the assessment year only if the escaped income is ₹50 lakh or more, up to a maximum period of five years from the end of the assessment year. Even in search cases, a time limit of six years before the year of search, as against the existing time limit of ten years, is proposed. This will reduce tax uncertainty and disputes.”