Tds - query on salary tds

This query is : Resolved

M Sathyendra (Querist)
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15 May 2012 Hi All,

There is a query w.r.t TDS.

There are 2 companies under the sama management. During the FY 2011-12, an employee was employed in 1 company until Jan 2012 but during Feb 2012, the management decided to give him dual employement and get him employed in both the entities with retrospective effect of Apr 2011.

Salaries were recomputed with retrospective effect and accordingly there were recoveries and payments between these 2 entities. However on the TDS portion, there was already excess taxes paid in 1 entity and accordingly no TDS was deducted in the other entity. All these adjustments were done in Mar 2012.

Now the questions we have is

- Entity 1 has a refund to be issued in the employee's Form 16

- Entity 2 has a liability in the employee Form 16

- When both Form 16's are clubbed net liability is Zero.

How do we adjust the same ? We dont want to issue a Form 16 with a liability and at the same time issue Form 16 with a refund. Do let us know how can this be adjusted ?

Further, what is the consequence if a Form 16 with a liability is issued and when a Tax notice comes, can the Entity 2 take shelter that there is already an excess tax deducted in Entity 1 and hence there is no Tax deducted in Entity 2 ? Can we substantiate the same but providing any document (Inter company transfer / Dual employment letter issue)

Any other issue that arises of the above situation ? How can company ensure that there is no issue with the employee and also with the company ?

Any response to this will be much appreciated.

Thanks. Mappaji.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 May 2012 For IT purpose there are 2 deductors.
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Both have to discharge their liability independently.
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Company 1 may issue Form 16 with a refund.
It has to revise its TDS Returns of Q1, Q2, Q3, if had already been filed. It can Reduce the Salary but not the amount of monthly TDS in respect to the concerned employee.
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Company 2 has to discharge its TDS obligation by deducting TDS since it has become liable.TDS is required to be deducted from the date when Salary for the month of April is paid (even by JV).
Company 2 should deduct applicable TDS on amount being paid.
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Other issues including the internal issues, will automatically be covered (Hidden), when proper or higher deductions are made.
TDS officers have got no power, and are not required to apply their mind in higher or proper deduction cases.
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My practical advise-

It is better- not to invite their attention
into internal or departmental matters of the company. In spite of that, deduct TDS at TAN of Company 2 and file the return of employee as entire tax credit appears in Form 26AS of the employee.
.

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