New Delhi, Nov 19 (PTI) Industry body Assocham has pitched for a single TDS rate of 1 per cent or 2 per cent for all payments made to resident assessees to avoid litigation on interpretational issues and ensure ease of tax compliance.

In a pre-Budget memorandum to the finance ministry, the industry chamber also made a case for decriminalisation of certain TDS (Tax Deducted at Source) defaults.

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Criminal proceedings should apply only when the taxpayer has enriched himself at the expense of the government, and not to cases where certain payments / benefits are made or provided without applying TDS, said Assocham President Sanjay Nayar.

"We expect tax reforms aimed at reducing litigation, easy and better compliance to be part of the Union Budget for 2025-26. Corporate India is giving some constructive recommendations in this regard. India Inc is also looking for measures which would boost both investment and consumption," he added.

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The chamber further stressed that tax neutrality should also be provided for amalgamation and demergers.

Currently, this is allowed only for companies and tax neutral merger and demerger and not for slump exchange. Besides, tax neutrality should be provided to Indian resident shareholders of foreign amalgamating and demerged entities, it said.

"Seeking flexibility and ease of compliance, the industry is seeking full tax neutrality which should be provided at both the entity and owner levels for all forms of entity conversions. This will go a long way in providing flexibility to businesses to choose entity forms that are most suited to them," said Deepak Sood, Secretary General, Assocham.

At present, there are gaps in the provisions relating to capital gains exemptions or carry forward of losses for amalgamations, demergers and other forms of business reorganisations like slump exchange/ sale, the industry body said.

These can be simplified and expanded, so as to enable businesses and investors to optimise their operations and holdings without facing tax costs and without going through the lengthy process of NCLT, the memorandum suggested.

It also recommended that buyback proceeds should be treated as dividends only to the extent the company undertaking the buyback possesses accumulated profits.

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