The Income-Tax Act casts
responsibility on the employer for tax deduction at source (TDS) at the time of
payment of salary to employees whose salary income is above the maximum amount
not chargeable to tax. The employer is required to deduct TDS on salary at the
average rate of income-tax and deposit the same with the government
within the prescribed time. The employer is also required to file withholding
tax returns and issue TDS certificate to the employee.
Various penalties are levied on
the employer in case of default, making the entire procedure equally painful
for your employer.
So, you must have started
realising that the grass on the other side is not as green as you thought.
Though, from the above it is understood that TDS is solely the obligation of
the employer but, if as an employee you are aware that there is a TDS default,
then you may be held responsible too. If your total income exceeds the maximum
amount not chargeable to tax and no TDS is being deducted by the employer, then
you are under an obligation to pay tax through the advance tax route.
You should estimate your total
income for the year that could comprise of salary, house property, interest
income etc. Relevant deductions applicable to each source of income, on account
of eligible investments, interest on housing loans, etc., can be considered to
calculate the taxable income. On this amount, you should calculate the tax
payable as per the applicable tax rates.
Having arrived at the gross tax
liability, reduce the amount of TDS suffered/ likely to be suffered on the
above income. If the balance tax payable exceeds Rs 5,000, you will be required
to comply with the advance tax provisions. The entire amount becomes payable as
advance tax in three installments on or before September 15th, December
15th and March 15th, during the financial year. In case you miss the
advance tax installments, taxes can also be deposited by way of self-assessment
tax post April 1 (after the end of financial year). In case the
employer has defaulted in TDS, it would be your responsibility to deposit taxes
by way of advance tax/ self-assessment tax as ultimately, taxes are to be
deposited on your income.
Failure to deposit taxes could
lead to concealment of income on your part, resulting in penalty to be paid by
you equivalent to 100-300% of the tax amount not deposited. Further, there are
interest implications as well , but there are judicial precedents which
indicate that if taxes were required to be deposited by way of TDS and have not
been done, the recipient of income is not required to pay interest.
Going forward, before you plan
your month-end celebrations, just glance through your pay stub. Instead of
creating a hue and cry over the tax figure, be thankful to your employer for
taking care of your taxes and saving you from a lot of hassles.