Mar 162016
 

TDS deducted but not deposited – Demand against Deductee

What the rule says?

Bar against direct demand on assessee.

  1. Where tax is deductible at the source under the foregoing provisions of this Chapter, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income.

What is TDS?

Under the tax recovery scheme of “Tax Deduction at source” or TDS, person responsible for making payment of income, covered by the scheme, is responsible to deduct tax at source and deposit the same to the government.

The position of amount deducted as TDS under income tax act is as below:

  1. The TDS so deducted is part of the total gross income of the assessee.
  2. The recipient of income – though gets only the net amount – is liable to tax on the gross amount.
  3. Thus, amount deducted at source is subtracted against the assessee final tax liability. This facility is know as – “Credit of tax deducted” and available in the following manner:
    • Credit of tax deducted and paid to the central government, shall be given to the deductee for the assessment year for which such income is offer for assessment.
    • Where income is assessable over a number of years, credit for the tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.
    • If the income is assessable in the hands of a person other than the deductee, then credit will be given to such other person.

Position of recipient of income after he receives TDS deducted income from payer:

Depending upon the circumstances of the case position of the receiver of income may be any of the following:

  • No TDS have been deducted on his he received
  • TDS have been deducted but no TDS certificate is issued to the assessee
  • The person who has issued tax deduction certificate has been refunded tax
  • TDS certificate has been issued but same is not appearing in Form No 26AS
  • The TDS deductor has not remitted tax deducted to the government
  • Deductor has not paid TDS but deductee has correctly paid tax on his total income.

Case 1: No TDS have been deducted-

In case deductor had not deducted TDS than there is no problem. Receiver of income shall compute tax liability in normal manner and pay his liability to central government.

Case 2: TDS have been deducted but no TDS certificate is issued to the assessee-

In view of section 205, under no circumstances, assessee is liable to make payment of any tax to the extent to which such tax had been deducted at source by the person paying income to the assessee. Hence income tax authorities cannot recover tax from the assessee.

Case 3: Tax has been refunded to the payer-

As assessee (from whose receipts tax has been deducted at source and who is also in possession of Form No 16/16A) must get credit of tax deducted at source and such credit cannot be decline merely on the ground that person who has issued tax deduction certificate has been refunded tax which he has deposited with the government.

Case 4: Tax credit is not appearing Form No 26AS:

This case may occur due to any mistake in filling return by deductor or in case PAN no is not furnished to him. If tax is deducted and TDS certificate in Form No 16/16A/16B is issued, credit of TDS can not be denied to the recipient solely on the ground that such credit does not appear in Form No 26AS.

Case 5: The TDS deductor has not remitted tax deducted to the government

Under such circumstances receiver of income will not have any control on the deductor to see if the tax deducted from his payment has been ultimately remitted to the government or not.

Thus, department does not have the option against the recipient but to allow him the credit. Means receiver of income shall be allowed to deduct TDS amount from his tax liability.

However, department may proceed against the deductor by holding him assessee in default.

Case 6: Deductor has not paid TDS but deductee has correctly paid tax on his total income (without claiming tax credit)

Where recipient of income has already paid taxes on amount received from deductor, department once again cannot recover tax from deductor on the same income by treating deductor to be assessee in default.

However, in the case of default, the payment of interest is mandatory for the period of delay caused by the omission for the tax to reach the government.

In short position in law is –

EITHER RECEIVER INCOME OR PAYER OF INCOME DEPOSIT THE TAX TO GOVERNMENT.
DEPARTMENT WILL CLAIM ONLY INTEREST FOR THE PERIOD OF DELAY.

Sensys

  13 Responses to “TDS deducted but not deposited – Demand against Deductee”

  1. i want to know that if the TDS is not deposited by the deductees even after sufficient time have been passed , (in my case it is 3-4 years) what is the punishment and penalty for deductees.i want to get reply in my e-mail address as above..
    regards
    gautam sengupta

  2. We had been working as franchisee with a company on revenue sharing basis. We got our payment after tds deduction of 10% but the company had deposited only 5% tds to govt .
    This amounts to cheating . Pl share as to whom we can complaint as we are not working with the company anymore .

  3. TDS DEDUCTED BUT NOT DEPOSITED BY DEDUCTOR
    PARTICULARS OF DEDUCTURE:
    RADIATE E-SERVICES PVT LTD
    Head Office: A-100, Sector-58, Noida, UP 201301.
    Email: info@radiate.co.in

    PAN : AAGCR2647K
    SERVICE TAX No. AAGCR2647KST001

    AAYAKAR BHAWAN

    MY PARTICULARS

    ANUJ SALUJA PAN : BJBPS6603Q
    H.NO. C-37 2nd Floor Om Vihar Uttam Nagar west New Delhi-110059

    THE ABOVE COMPANY HAS DEDUCTED A SUM OF RS. 55343/- out of this 29980 are not deposited by company.

    Please find below TDS Details as required

    Month Emp Code Emp Name Gross Salary TDS Net
    August RES3040 Anuj Saluja 49,355 49,335
    September RES3040 Anuj Saluja 85,000 2,682 82,318
    October RES3040 Anuj Saluja 85,000 2,681 82,319
    November RES3040 Anuj Saluja 85,000 20,000 65,000
    December RES3040 Anuj Saluja 85,000 15,000 70,000
    January RES3040 Anuj Saluja 85,000 14,980 70,020

    AS TDS ON DURING F.Y. 2016-17 HAS BEEN DEFUCTED BUT HAS NOT DEPOSITED IN GOVT. ACCOUNT. IT IS NOT REFLECTING IN MY 26AS FOR A.Y. 2017-18 AND DEPARTMENT HAS RAISED A DEMAND AGAINST MY CLAIM OF TDS IN MY ITR FOR A.Y. 2017-18.KINDLY SOLVE MY PROBLEM AND TAKE APPROPRIATE ACTION.

    I REQUESTED MANY TIMES BUT COMPANY THREATENED ME SUE THE CASE IN COURT YOU Had STOLEN OUR COMPANY DATA. AFTER That I RESIGNED THIS COMPANY. STILL MY FNF AMOUNT NOT GIVEN TO ME.

    THANKS
    Anuj saluja

    • Here 2 situations will arise ….
      1.If u are eligible to get TDS Refund (i.e., If more TDS is deducted than the tax to be paid), then u can claim refund in IT return even if the company not deposited the same with Govt, provided u have pay-slips.Then if Assessing officer object ur claim, u can show ur pay slips and so he will inquire into same by examining comapny’s books….
      2.Even if no refund case also, u can pay only the remaining tax by claiming the tds deducted (as per pay slips).

      Basically,it is comapny resposibility to deposit the dedducted.If it didn’t do so,it is default of the company &company is required to pay penalties & interest…& in case of any assessment happened, then also u can show ur payslips to Assessment officer…Law clearly says that….”at any cost employee should not be suffered if TDS had deducted from his/her salary, whether it is deposited or not….”

  4. kindly suggest action.

  5. I have noticed a very strange behaviors by Govt deductees especially CDA Ministry of Defence. These people deduct the TDS but don’t issue TDS cert and they don’t even deposit TDS with income tax. So where is this amount going needs a lot of research. Someone can take this matter. These Govt. Defence employees don’t respond to emails, letters and they are unaccessable as guards there don’t allow you to enter without appointment. The only thing left now is the RTI or writing to PMO. I am now even doubting the very recruitment process of these persons. How can they got these jobs if they are incompetent. Min. of defence has lot to answer.

    • I doubt competence has anything to do with it. Clearly there is a case for malpractice and felony. If this is widespread or even occurred more than just a few times there is enough cause to initiate a RTI and/or approach the courts for redressal. A PIL will be admitted by any court.

  6. Tax deducted by the ddo fully and issued form 16 and return filed accordingly but in form 26as it is shown short payment by Rs. 1030. IT department demanded the said amount Rs. 1030 and my DDO not responding in this matter. Please advise, what is my duty now.

  7. Case 4: Tax credit is not appearing Form No 26AS:

    This case may occur due to any mistake in filling return by deductor or in case PAN no is not furnished to him. If tax is deducted and TDS certificate in Form No 16/16A/16B is issued, credit of TDS can not be denied to the recipient solely on the ground that such credit does not appear in Form No 26AS.
    same as above employer deducted tax from my salary and issued form 16 with details but not entered my pan no.income tax department issue notice to us. my employer not responding.pl help me.

  8. In case 5, where the company has deducted the TDS and I the employee,, have been paid after this TDS deduction but where the company has failed to deposit this TDS to the Govt and subsequently I have filled the returns assuming (TDS deducted will be paid by company). Here I’ve received a demand from IT as the TDS deducted by the company is not reflecting in the 26AS, as they have not deposited and the company has closed down.

    From the reply above I understand that I am not liable but under what provision of law do I claim protection ? Whom do I write to as the notice is from Centralised Processing Dept of IT

  9. My tax dedutor not deposited the tds amount to the tax authorities thats why it is not reflected in my 26as and i dont have tds certificate. now what is the procedure to claim the deduction in my itr please advise me as soon as possible.

  10. my tax dedutor not deposited the tds amount to the tax authorities thats why it is not reflected in my 26as and i dont have tds certificate. now what is the procedure to claim the deduction in my itr please advise me as soon as possible.

    • I am also in the same position. I filed the return2016-17, quoting clearly the TAN number of the deductor and the amount deducted. Unfortunately IT notice come indicating shortfall in income tax to the extent of TDS not deposited by the deductor.and to pay the same within 30 days. Since the TDS was not paid by the Deductor, I paid the amount immediately on receipt of the ntoice. But I dont know whether the same will be crdited automatically if and when the deductor remits the TDS or we have to go to the rigourous procedure of making our claim again and again.

      Though clear circular was available that it should not be claimed from Deductee by the IT department, they will issue notice and we have no choice, except to pay the amount of TDS as demanded by the IT department.
      IT department should come to the rescue of innocent and prompt taxpayers.

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