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Employer Defaulted TDS? You Won't Pay Twice
25 Jun
Summary
- Tax demand issued despite employer deducting TDS.
- Tribunal rules employee not liable for employer's TDS failure.
- Employees need to preserve salary slips and Form 16.
The Income Tax Appellate Tribunal (ITAT) Mumbai recently ruled that salaried individuals are not liable to pay taxes again if their employer deducted tax at source (TDS) but failed to deposit it with the government. This decision addresses situations where TDS credit mismatches in Form 26AS trigger automated tax demands.
In the case of Sophia Rick v. ITO, an employee faced a tax demand of over Rs 3 lakh because her employer allegedly deducted TDS but did not remit it, causing the credit to not appear in her Form 26AS. The Tribunal invoked Section 205 of the Income-tax Act, which prohibits re-recovery of tax once deducted at source.
The ruling emphasizes that the employee's tax obligation ends at the point of TDS deduction. It also relies on CBDT instructions directing recovery efforts towards the deductor (employer) in such cases.
To protect themselves, salaried employees should maintain meticulous records, including monthly salary slips, bank statements, and Form 16. These documents are vital for substantiating TDS deductions if a dispute arises, even if Form 26AS shows discrepancies.
