FICCI suggests changes in TDS norms, reducing pendency of appeals
Industry body, FICCI on Tuesday urged the Finance Ministry to rationalize the TDS (Tax Deducted at Source) norms. It also sought reduction in pendency before first level of appeal and allow refund of taxes collected during pendency of appeal.
“Simplification of the TDS rate structure will considerably ease the compliance burden on the taxpayers and avoid litigation due to characterisation disputes,” the industry body said in its pre-budget memorandum submitted to Revenue Secretary Arvind Srivastava.
Currently, there are 37 different types of payments to residents where the TDS rates vary from 0.1 per cent to 30 per cent. This gives rise to unwarranted disputes related to categorisation and interpretation. It also leads to cash flow blockage for the industry and interest cost for the government on refunds, said the industry body.
“To further enhance the ease of doing business, the government should consider laying down a roadmap for rationalisation of TDS rate structure,” it said while noting that the Government has made a good start to the simplification process by reducing the TDS rates on several payments to 2 per cent from 5 per cent. It suggested only three rate structures for TDS payments –on salary at slab rate, on lotteries/online games etc at maximum marginal rate and two standard rates for TDS for different categories.
Another suggestion was regarding reducing pendency before Commissioner of Income Tax-Appeal. “Reduction of pendency before CIT(A) is critical to success of new Faceless Appeal system, alleviate hardships faced by taxpayers by way of demands & blockage of refunds,” it said.
CIT(A) is the first level of appeal after assessment order is received (except in cases where assessment order is passed pursuant to directions of Dispute Resolution Panel). Quoting various reports, the industry body said that currently, there is a huge pendency of appeals filed before CIT(A). Around 5.4 lakh cases are stuck with CIT(A) as on April 1, 2025 involving amount of ₹18.16 lakh crore.
The industry body recommended that CBDT should direct CIT(A) to dispose cases such as high -pitched assessment/high tax demand cases and cases where assessee has submitted its detailed written submission and while uploading the same has selected “Full response” on income tax portal on priority basis.
It also recommended that 40 per cent vacanciesat the level of CIT(A) should be immediately filled up with competent personnel through internal promotions/ transfers and/ or external recruitments.
The industry body also sought providing clarity on tax neutrality of fast-track demergers will facilitate demergers in small size companies and intra-group restructuring in a smaller time frame, relieve burden on NCLT for processing such applications and thereby improve “ease of doing business” without adversely impacting Revenue’s interests.
The industry body also pitched for restoring Associated Enterprise (AE) definition in new Act as per old Act. “Restoring AE definition in the new Act as per definition in the existing Act will preserve continuity of tax policy as recommended by Select Committee; provide certainty on TP compliance for taxpayers and avoid unwarranted litigation on coverage of AEs,” it said.
Published on October 28, 2025
