Tds on salary demand but the employee has paid advance tax
This query is : Resolved
19 May 2015
My client,a partnership firm has got a tds demand for short deduction of tDS on salary but the employee has paid advance tax.ho should one proceed with the demand notice
19 May 2015
you can show the advance tax challan copy provided to them by the employee
19 May 2015
Do I need to file correction statement?whom do I show the challan
copy
copy
19 May 2015
Do I need to file correction statement?whom do I show the challan
copy
copy
27 July 2025
You're dealing with a **TDS demand for short deduction on salary**, but your **employee has already paid the corresponding tax through advance tax**. This is a **common situation**, but unfortunately, **employee payment of tax doesn’t automatically absolve the employer from TDS liability**.
Let’s clarify what to do.
---
## 🔎 Issue at Hand:
* The **employer (your client)** deducted **less or no TDS** on salary.
* The **employee paid the tax directly** via **advance tax**.
* The Income Tax Department has now raised a **TDS short deduction demand**.
---
## ⚠️ Key Legal Principle:
As per the Income Tax Act:
* **TDS obligation is separate from the actual tax payment** by the deductee.
* Even if the employee paid the correct tax, **the employer is still liable for failure to deduct and deposit TDS**.
* However, relief **can be claimed under proviso to Section 201(1)** if the tax has been paid by the deductee.
---
## ✅ Relief Available – **Proviso to Section 201(1)**
You can avoid being treated as an "assessee in default" **if** you meet **all** of the following:
1. The employee (deductee) has **furnished their return of income**.
2. The employee has **included this income in their return**.
3. The **tax due has been paid** by the employee.
4. The employer furnishes a **certificate from a CA in Form 26A**.
---
## 📄 What You Should Do:
### Step 1: **Obtain Form 26A Certificate**
* Get a **Chartered Accountant** to issue **Form 26A**, certifying:
* The employee filed ITR.
* Salary income was reported.
* Full tax liability was paid.
### Step 2: **File a TDS Correction Statement**
* File a correction statement through **TRACES**, linking the **Form 26A** and addressing the short deduction.
* You may need to select the **“non-deduction / lower deduction” justification** in the correction.
### Step 3: **Submit Form 26A Online**
* Log in to the **TRACES** portal.
* Upload **Form 26A** digitally signed by the CA.
* It will be validated by the Income Tax Department.
### Step 4: **Respond to the Demand**
* After validation, the TDS CPC may **withdraw the demand**.
* If the demand is still pending, submit a **response on the e-filing portal** under **Pending Actions > E-proceedings / Demand**.
---
## 🛑 Don't Just Submit the Advance Tax Challan
* Submitting the challan alone **is not sufficient**.
* The **law requires a CA certificate in Form 26A** to **officially close the employer’s TDS liability**.
---
## 🔚 Summary Table
| Action | Required? |
| ------------------------- | ------------------- |
| Get Form 26A from CA | ✅ Mandatory |
| File correction statement | ✅ Yes, via TRACES |
| Submit challan alone | ❌ Not sufficient |
| Respond to demand online | ✅ After above steps |
---
Let me know if you need a **sample Form 26A format**, or help with the **TRACES correction process**.
Let’s clarify what to do.
---
## 🔎 Issue at Hand:
* The **employer (your client)** deducted **less or no TDS** on salary.
* The **employee paid the tax directly** via **advance tax**.
* The Income Tax Department has now raised a **TDS short deduction demand**.
---
## ⚠️ Key Legal Principle:
As per the Income Tax Act:
* **TDS obligation is separate from the actual tax payment** by the deductee.
* Even if the employee paid the correct tax, **the employer is still liable for failure to deduct and deposit TDS**.
* However, relief **can be claimed under proviso to Section 201(1)** if the tax has been paid by the deductee.
---
## ✅ Relief Available – **Proviso to Section 201(1)**
You can avoid being treated as an "assessee in default" **if** you meet **all** of the following:
1. The employee (deductee) has **furnished their return of income**.
2. The employee has **included this income in their return**.
3. The **tax due has been paid** by the employee.
4. The employer furnishes a **certificate from a CA in Form 26A**.
---
## 📄 What You Should Do:
### Step 1: **Obtain Form 26A Certificate**
* Get a **Chartered Accountant** to issue **Form 26A**, certifying:
* The employee filed ITR.
* Salary income was reported.
* Full tax liability was paid.
### Step 2: **File a TDS Correction Statement**
* File a correction statement through **TRACES**, linking the **Form 26A** and addressing the short deduction.
* You may need to select the **“non-deduction / lower deduction” justification** in the correction.
### Step 3: **Submit Form 26A Online**
* Log in to the **TRACES** portal.
* Upload **Form 26A** digitally signed by the CA.
* It will be validated by the Income Tax Department.
### Step 4: **Respond to the Demand**
* After validation, the TDS CPC may **withdraw the demand**.
* If the demand is still pending, submit a **response on the e-filing portal** under **Pending Actions > E-proceedings / Demand**.
---
## 🛑 Don't Just Submit the Advance Tax Challan
* Submitting the challan alone **is not sufficient**.
* The **law requires a CA certificate in Form 26A** to **officially close the employer’s TDS liability**.
---
## 🔚 Summary Table
| Action | Required? |
| ------------------------- | ------------------- |
| Get Form 26A from CA | ✅ Mandatory |
| File correction statement | ✅ Yes, via TRACES |
| Submit challan alone | ❌ Not sufficient |
| Respond to demand online | ✅ After above steps |
---
Let me know if you need a **sample Form 26A format**, or help with the **TRACES correction process**.
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