Industry body Assocham has proposed a uniform TDS rate of 1 per cent or 2 per cent on all payments made to resident assessees, aiming to reduce litigation stemming from interpretational issues and simplify tax compliance. In its pre-budget memorandum to the Finance Ministry, the chamber also advocated for the decriminalisation of certain TDS defaults.

Assocham President Sanjay Nayar stated that criminal proceedings should be reserved for cases where taxpayers have enriched themselves at the government's expense rather than for instances where payments or benefits are provided without the application of TDS.

"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.

The chamber also emphasised the need for tax neutrality in cases of amalgamations and demergers. At present, tax neutrality is available only for companies undergoing tax-neutral mergers and demergers but not for slump exchanges. Additionally, it called for extending tax neutrality to Indian resident shareholders of foreign companies involved in amalgamations or demergers.

"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," noted Deepak Sood, Secretary General, Assocham.

The industry body pointed out existing gaps in the provisions related to capital gains exemptions and the carryforward of losses for amalgamations, demergers, and other business reorganisations, such as slump exchanges and asset sales. It recommended simplifying and expanding these provisions to help businesses and investors optimise operations and holdings without incurring tax liabilities or undergoing the lengthy NCLT process. 

Additionally, the memorandum suggested that buyback proceeds should be treated as dividends only to the extent that the company executing the buyback has accumulated profits.