The Budget has given a big relief to taxpayers whose taxes are deducted at source. Under tax deduction at source (TDS), every person responsible for payment of any sum to any person is required to deduct tax at source at the prescribed rate and deposit it with the central government.
Deduction would be in order if the payments exceeded the prescribed threshold limit. But, the Budget has increased the threshold limit of a number of items (see chart). This will be a relief to ordinary taxpayers and particularly to senior citizens whose total income falls below the taxable income. The threshold limit for rental income has been increased from Rs 1,20,000 to Rs 1,80,000. Take for example, a senior citizen whose total income is less than Rs 2,40,000 and who has a rental income of Rs 1,80,000, which he receives from a company.
According to the existing system, the company will pay him the rental after deducting tax at the rate of 10%. Now, to claim the refund for the tax deducted from his rental income as his total income is less than Rs 2,40,000, he will have to file a return with the department. After filing the return, he will have to wait to get the refund.
Under the new system, the TDS will not be affected as his rental income is not more than Rs 1,80,000. This will save him the cumbersome process of filing the return to get refund.
Similarly, the threshold limit for insurance commission for TDS has increased to Rs 20,000 from Rs 5,000. This will save an agent inconvenience if income is less than the taxable income. Otherwise also, he will not have to wait for a refund. These amendments will take effect from July 1, 2010.