Dear friends, I want to share some problems being faced by accountants in the industry who administer TDS on employees of their employers organization.
U/s 192 of Income Tax Act, specified employer is required to deduct tax on salaries & allowances paid to its employees on average rate of tax payable thereon.
While TDs is deductible under other provisions of Income Tax Act on gross amount paid or credited within a financial year, TDS on salaries is deductible only on actual payment to the employee.
Moreover the tax is deductible on average rate of tax payable by the employee which varies with every payment of salary, allowance and perquisites as per terms of employment and claim of employee for exemptions, deductions, investments made etc. it becomes a tedious and cumbersome job for accountant to compute tax liability of each n every employee every time and deduct tax properly.
It is noteworthy here that Section 220 empowers ITO to call for explanation from the employer for non equated deductions of tax from employees and demand interest on short deductions that creates a havoc in the minds of accountant because the employer always blames him for the default and employees criticize him for not giving all the tax benefits that may be available to individual cases.
ITO has power to verify the claims of employees collected by the employer and if some claims are disallowed, tax, interest n penalty is recoverable from employers.
Thus in short TDS on employees has ample scope of concealment, exemptions, valuation of perquisites, provision and payment etc and since salaries paid and tax deducted have no correlation as per the quarterly returns uploaded on income tax website, there is ample scope of scrutiny, harassment, mismanagement and enquiry by ITO as well.
Therefore in my view TDS on salaries n wages under section 192 should be deductible on the basis of 5% or 10% of gross remuneration paid to employee. This will not only reduce unnecessary work of accountants but will also make the TDS Returns compatible and filing of returns by employees. ITOs will not go for fishing expedition on individuals assessees for harassment and extortion etc. Instead their attention will be business entities who are not only the largest tax collectors but also the evaders
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