If your employer defaults on TDS payment

If your employer defaults on payment.

It’s July again, the time of the year when every has to discharge his/her obligation of filing annual returns. For most salaried people, the process is essentially straight, whereby the details of salary income and the taxes deducted thereon every month is furnished to the Income (I-T) Department in the prescribed form and, more often than not, there is no payable by the employee.

But, what if the taxes deducted at source (TDS) from an employee’s salary is not paid by the company into the government treasury? In such a case, can the department recover the amount (along with the applicable interest and penalties) from the employee?

There was a cse in this regard, decided some time earlier by the high court at Mumbai in the case of Yashpal Sahni versus assistant commissioner, I-T. Sahni was paid salary along with other benefits after a total of Rs 666,000. Accordingly, in his return for the said year, the payer filed the return of income after claiming credit for the as above. When the returns were processed by the I-T officer, the credit for was denied and a total demand of about Rs 12,73,000 (including and interest under various provisions) was raised.

Sahni applied for rectifying the said demand, saying the amount so deducted from his salary should be recovered from the company and, in any event, the credit for the along with the interest could not be recovered from him. However, the department further imposed a penalty on Sahni, raising the total demand to about Rs 17,90,000. In response, Sahni appealed to the high court.

During the proceedings, the taxpayer’s representative argued that once the company had deducted from the salary, this could not be recovered from the former. It was the duty of the deductor to provide the certificate to the taxpayer, to enable him to claim credit for the so deducted. The I-T Act has the necessary provisions to levy and recover interest from the company for the period the was deducted but not deposited in the government account. It could also levy a penalty and the company was liable to punishment under the Act.

VERDICT & WHY
The court said it was the employer’s responsibility to employees to deduct the applicable at source on their income at the applicable rates. Further, such taxes had to be paid to the credit of the central government within the prescribed time limit. In case the company defaulted on depositing the collected, it shall be liable to pay interest at the prescribed rate on the amount. Also, the Act had enough provision to both punish the defaulter and recover the from the person who had deducted it.

The HC also noted Section 205 of the I-T Act said that where was deductible at source, the shall not be called upon to pay the amount himself to the extent of deduction. The court deduced from the language of this section that once it was established that the had been deducted at source from the salary of the employee, the bar under Section 205 comes into operation.

It matters not whether the deducted at source was paid to the central government or not, because elaborate provisions are made under the Act for recovery of from the person who did the deduction. In this case, Sahni had furnished monthly pay slips and bank statements to show that the employer had deducted taxes at source from his salary; the department hadn’t disputed this.

In the absence of the certificate being issued to the taxpayer, said the court, it may not be possible to give credit for the to him. Still, if he was made to pay the again, it would amount to double taxation, which was illegal. The fact that the employer had not issued the certificate to the employee did not mean the liability ended. The liability to pay income tax, if deducted at source, was on the employer. And, even if the credit of the amount was not available to the for want of the certificate, the fact that the had been deducted at source from his salary would be sufficient to ensure the department could not recover the amount with interest from him again. The department was asked to refund the demand amount paid by the former (at the time of filing the appeal to the court), along with the prescribed interest.

This case should be noted by taxpayers. To summarise:  

  • Preserve your monthly pay slips till at least the time you get Form 16 for the year;
  • If Form 16 isn’t received, you can file your returns on the basis of the pay slips; 
  • The employee can get credit for the if deducted, even if Form 16 is not available; 
  • The employee need not worry about paying taxes again on the income just for want of Form 16.

The writer is a certified financial planner

image
Business Standard
177 22
Business Standard

If your employer defaults on TDS payment

Arvind Rao 

If your employer defaults on payment.

It’s July again, the time of the year when every has to discharge his/her obligation of filing annual returns. For most salaried people, the process is essentially straight, whereby the details of salary income and the taxes deducted thereon every month is furnished to the Income (I-T) Department in the prescribed form and, more often than not, there is no payable by the employee.

But, what if the taxes deducted at source (TDS) from an employee’s salary is not paid by the company into the government treasury? In such a case, can the department recover the amount (along with the applicable interest and penalties) from the employee?

There was a cse in this regard, decided some time earlier by the high court at Mumbai in the case of Yashpal Sahni versus assistant commissioner, I-T. Sahni was paid salary along with other benefits after a total of Rs 666,000. Accordingly, in his return for the said year, the payer filed the return of income after claiming credit for the as above. When the returns were processed by the I-T officer, the credit for was denied and a total demand of about Rs 12,73,000 (including and interest under various provisions) was raised.

Sahni applied for rectifying the said demand, saying the amount so deducted from his salary should be recovered from the company and, in any event, the credit for the along with the interest could not be recovered from him. However, the department further imposed a penalty on Sahni, raising the total demand to about Rs 17,90,000. In response, Sahni appealed to the high court.

During the proceedings, the taxpayer’s representative argued that once the company had deducted from the salary, this could not be recovered from the former. It was the duty of the deductor to provide the certificate to the taxpayer, to enable him to claim credit for the so deducted. The I-T Act has the necessary provisions to levy and recover interest from the company for the period the was deducted but not deposited in the government account. It could also levy a penalty and the company was liable to punishment under the Act.

VERDICT & WHY
The court said it was the employer’s responsibility to employees to deduct the applicable at source on their income at the applicable rates. Further, such taxes had to be paid to the credit of the central government within the prescribed time limit. In case the company defaulted on depositing the collected, it shall be liable to pay interest at the prescribed rate on the amount. Also, the Act had enough provision to both punish the defaulter and recover the from the person who had deducted it.

The HC also noted Section 205 of the I-T Act said that where was deductible at source, the shall not be called upon to pay the amount himself to the extent of deduction. The court deduced from the language of this section that once it was established that the had been deducted at source from the salary of the employee, the bar under Section 205 comes into operation.

It matters not whether the deducted at source was paid to the central government or not, because elaborate provisions are made under the Act for recovery of from the person who did the deduction. In this case, Sahni had furnished monthly pay slips and bank statements to show that the employer had deducted taxes at source from his salary; the department hadn’t disputed this.

In the absence of the certificate being issued to the taxpayer, said the court, it may not be possible to give credit for the to him. Still, if he was made to pay the again, it would amount to double taxation, which was illegal. The fact that the employer had not issued the certificate to the employee did not mean the liability ended. The liability to pay income tax, if deducted at source, was on the employer. And, even if the credit of the amount was not available to the for want of the certificate, the fact that the had been deducted at source from his salary would be sufficient to ensure the department could not recover the amount with interest from him again. The department was asked to refund the demand amount paid by the former (at the time of filing the appeal to the court), along with the prescribed interest.

This case should be noted by taxpayers. To summarise:  

  • Preserve your monthly pay slips till at least the time you get Form 16 for the year;
  • If Form 16 isn’t received, you can file your returns on the basis of the pay slips; 
  • The employee can get credit for the if deducted, even if Form 16 is not available; 
  • The employee need not worry about paying taxes again on the income just for want of Form 16.

The writer is a certified financial planner

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If your employer defaults on TDS payment

If your employer defaults on TDS payment.

If your employer defaults on payment.

It’s July again, the time of the year when every has to discharge his/her obligation of filing annual returns. For most salaried people, the process is essentially straight, whereby the details of salary income and the taxes deducted thereon every month is furnished to the Income (I-T) Department in the prescribed form and, more often than not, there is no payable by the employee.

But, what if the taxes deducted at source (TDS) from an employee’s salary is not paid by the company into the government treasury? In such a case, can the department recover the amount (along with the applicable interest and penalties) from the employee?

There was a cse in this regard, decided some time earlier by the high court at Mumbai in the case of Yashpal Sahni versus assistant commissioner, I-T. Sahni was paid salary along with other benefits after a total of Rs 666,000. Accordingly, in his return for the said year, the payer filed the return of income after claiming credit for the as above. When the returns were processed by the I-T officer, the credit for was denied and a total demand of about Rs 12,73,000 (including and interest under various provisions) was raised.

Sahni applied for rectifying the said demand, saying the amount so deducted from his salary should be recovered from the company and, in any event, the credit for the along with the interest could not be recovered from him. However, the department further imposed a penalty on Sahni, raising the total demand to about Rs 17,90,000. In response, Sahni appealed to the high court.

During the proceedings, the taxpayer’s representative argued that once the company had deducted from the salary, this could not be recovered from the former. It was the duty of the deductor to provide the certificate to the taxpayer, to enable him to claim credit for the so deducted. The I-T Act has the necessary provisions to levy and recover interest from the company for the period the was deducted but not deposited in the government account. It could also levy a penalty and the company was liable to punishment under the Act.

VERDICT & WHY
The court said it was the employer’s responsibility to employees to deduct the applicable at source on their income at the applicable rates. Further, such taxes had to be paid to the credit of the central government within the prescribed time limit. In case the company defaulted on depositing the collected, it shall be liable to pay interest at the prescribed rate on the amount. Also, the Act had enough provision to both punish the defaulter and recover the from the person who had deducted it.

The HC also noted Section 205 of the I-T Act said that where was deductible at source, the shall not be called upon to pay the amount himself to the extent of deduction. The court deduced from the language of this section that once it was established that the had been deducted at source from the salary of the employee, the bar under Section 205 comes into operation.

It matters not whether the deducted at source was paid to the central government or not, because elaborate provisions are made under the Act for recovery of from the person who did the deduction. In this case, Sahni had furnished monthly pay slips and bank statements to show that the employer had deducted taxes at source from his salary; the department hadn’t disputed this.

In the absence of the certificate being issued to the taxpayer, said the court, it may not be possible to give credit for the to him. Still, if he was made to pay the again, it would amount to double taxation, which was illegal. The fact that the employer had not issued the certificate to the employee did not mean the liability ended. The liability to pay income tax, if deducted at source, was on the employer. And, even if the credit of the amount was not available to the for want of the certificate, the fact that the had been deducted at source from his salary would be sufficient to ensure the department could not recover the amount with interest from him again. The department was asked to refund the demand amount paid by the former (at the time of filing the appeal to the court), along with the prescribed interest.

This case should be noted by taxpayers. To summarise:  

  • Preserve your monthly pay slips till at least the time you get Form 16 for the year;
  • If Form 16 isn’t received, you can file your returns on the basis of the pay slips; 
  • The employee can get credit for the if deducted, even if Form 16 is not available; 
  • The employee need not worry about paying taxes again on the income just for want of Form 16.

The writer is a certified financial planner

image
Business Standard
177 22

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