The income tax (I-T) department is planning to take penal action against organisations which do not file TDS (tax deducted at source) returns of their employees on time or make inaccurate entries in the TDS certificates. The department also said that names of such firms would be made public.
Currently, there are a large number of tax payers who don’t receive credit for the taxes deducted from their salaries by their employers. These taxpayers also don’t get their TDS certificate.
According to officials, the I-T department has found that the deductor in most cases was at fault for not filing TDS returns on time or making inaccurate or incomplete entries.
For the first time, the TDS statements were analysed by the department in an organised manner and defaults on various counts were communicated to the deductor community. This exercise has sent a very strong message to the tax professionals and the deductors. The deductors are found to be at fault for late payment (of taxes) which leads to the burden of penal interest on the taxpayer.
Deductors are required to prepare and deliver an quarterly return of tax deducted at source. The q4 return of TDS is to be delivered to the assessing officer before May 15 of the following financial year.
The official further said that laws relating to enforcement of TDS provisions need to be tightened as there are huge mismatches. In AY (assessment year) 2009-10, nearly 2.66 lakh tax payers quoted invalid tax deduction account number (TAN) in their income tax returns. Out of about 43 lakh TDS statements in FY 2009-10, nearly 6 lakh TDS statements were filed by more than 12 months from the due date. In FY 2009-10, invalid or no PAN were quoted in nearly 2.65 crore entries, involving R11,650 crore. TAN is a number allotted to the deductor of tax at source for the purpose of identification of every deductor.
The income tax department also found that some deductors had deducted TDS but had not deposited it in the government account.
“ Identification of non-filers of TDS statements and action against these non-filers has to be a priority area for the current year,” an official said.
According to Deloitte partner Homi Mistry, the employers should be careful while filing TDS returns of their employees and this should be done in the most timely and accurate manner. Besides this, employees should also check their TDS forms on quarterly basis to avoid any mistake.
The challenge for the revenue department is to get the due tax and ask the deductors to file correct TDS statements so that the government gets revenue and tax payers get proper credit for TDS.
Growth of TDS collection during the five-year period rose from R70,689 crore in 2006-07 to R1,66,687 crore in 2010-11, which constitutes 37.37% of total direct tax collection.