TDS deposit rules for employers relaxed from today (Oct 1)

In a major relief to the employers, the Centre has relaxed the rules for companies of depositing the Tax Deducted at Source (TDS) on salaries of employees. Employers will now have more time to deduct Tax Deducted at Source (TDS) from employees’ salaries starting from October 1, 2024. The revised rule allows employers additional time to submit TDS filings to the government beginning October 1.  

TDS, or Tax Deduction at Source, is the sum employers deduct from employees’ salaries and transfer to the government. As per the Income Tax Act, employers must deduct TDS on salary income according to the relevant slab rates. In general, the due date to deposit the TDS is 7th of every month, which is the following month in which it was deducted from the employee’s salary.

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Starting October 1, 2024, employers will be granted an extended period to deduct Tax Deducted at Source (TDS) from employees’ salaries. The revised regulations allow companies to deposit TDS up to the deadline for filing TDS returns, providing an extra 20 days beyond the previous timeframe. 

Previously, businesses were required to deposit TDS within 60 days before receiving a notification of default. However, with the updated guidelines, companies now have the flexibility to complete TDS deposits by the TDS return filing deadline, thereby averting penalties.

The recent changes in TDS regulations offer extended deadlines for businesses to submit TDS payments to the government. This adjustment benefits companies without compromising the employees’ TDS credits. However, failure to deposit the deducted taxes by the due date may result in the income tax department issuing a prosecution notice to the companies for not filing the TDS return on time.

What if the employer doesn’t pay TDS

Employees are unable to claim TDS credit when the employer deducts TDS but fails to deposit it. In such situations, Section 205 of the Income Tax Act provides protection to employees against double taxation, on condition that they can substantiate the TDS deduction from their income.

In order to claim TDS credit and prevent any additional tax liabilities, individuals are required to furnish evidence to the income tax department showing that tax has been deducted from their salary.

Bombay HC ruling

In a recent ruling by the Bombay High Court on September 10, it was unequivocally established that an employee should not be subjected to penalties for their employer’s failure to deposit the tax deducted at source (TDS) from their salary. Specifically addressing the case involving Tata Consultancy Services employees, who had received demand notices from the Income Tax department regarding discrepancies in TDS claims, this judgment set a crucial precedent.

Furthermore, the issue extended beyond TCS as former employees of the edtech firm Byju’s also faced notices from the Income Tax department for unpaid TDS. The Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) reinforced this stance in April, clarifying that the burden of proof of TDS concerning salary income rests with the employee, not the employer.

“We find that the mandate of Section 205 is absolutely clear that the assessee shall not be called upon to pay taxes himself to the extent to which tax has been deducted from the assessee’s income. The object and purpose behind the provision is to the effect that when an obligation to deposit the tax as in the present case, is on the employer and if the employer has defaulted, the liability to pay such tax cannot be shifted so as to be foisted on the employee,” the Bombay High Court said in a recent order

Source: bt Money today