Tds matter

This query is : Resolved

Nishant Kakkar (Querist)
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28 February 2015 Hello sir,

i joined new company in which employee received higher salary by cheque but not account payee cheque. I want to deduct the TDS on the same amount but they told me that we receive the salary by normal cheque instead of Account payee or NEFT. in ths situation pls suggest me that can i deduct the TDS if the received salary by cheque instead of Account payee.

some of employee receive salary in two cheque first on their and second on the name of their wife. in that condition pls suggest me that is it the normal procedure or attract any fine/ penalties to my employer.

thanking you
M-98710-3407

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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02 March 2015 whether paid via account payee or otherwise tds needs be deducted under any case.

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Nishant Kakkar

Nishant Kakkar (Querist)
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03 March 2015 Dear sampat sir,

Thax for your answer but please refer section no as there are many senior member/employee in my company who need evidence. as i say they don't agree but if i show them references then they agree. so please provide me the section no in this regards.

Thanking you

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 Hi there,

You're absolutely right to seek clarity with **legal backing** when discussing TDS (Tax Deducted at Source), especially for salary payments.

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### ✅ **1. TDS on Salary – Applicable Regardless of Mode of Payment**

Under the **Income Tax Act**, **TDS on salary is governed by Section 192**.
This section clearly states that **TDS must be deducted at the time of payment**, irrespective of **how** the salary is paid (cash, cheque, NEFT, etc.).

#### 🔹 **Relevant Section:**

> **Section 192(1)** – "Any person responsible for paying any income chargeable under the head ‘Salaries’ shall, at the time of payment, deduct income-tax on the estimated income of the assessee under the head 'Salaries'."

✅ Nowhere does the Act say that TDS is only applicable if the payment is made via account payee cheque or NEFT.

So:

* Whether salary is paid **by cash**, **normal cheque**, **account payee cheque**, or **bank transfer**,
➡️ **TDS must be deducted** (if the employee’s salary is taxable).

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### ❌ **2. Splitting Salary Between Employee & Spouse – Not Permitted**

If the company is issuing part of an employee’s salary in the name of his **wife** (or other relatives), then:

* It is **not a correct practice** under the Income Tax Act.
* It may be viewed as **tax evasion** or **attempt to reduce TDS liability**.
* **Entire salary** paid for services rendered by the employee **should be taxed in the hands of the employee only**.

#### 🔹 Section Involved:

> Under the **clubbing provisions** (Section **64(1)(iv)**), any income transferred to a **spouse** without adequate consideration is to be **clubbed with the income of the transferor**.

So paying part of salary to the wife and not deducting TDS on that portion is **non-compliant** and may invite:

* **Interest under Section 201(1A)** for late/short deduction,
* **Penalty under Section 271C**, and
* **Disallowance of expenses under Section 40(a)(ia)** in employer's tax computation.

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### ✅ Suggested Action:

* **Deduct TDS on full salary** paid to employees regardless of payment method.
* Avoid splitting salary payments with non-employees like spouses.
* Maintain proper documentation and follow payroll compliance strictly.

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Let me know if you'd like a draft letter or note quoting the above sections to explain to your management.

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