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TDS on Interest - Employee

23 July 2009

We all know that Employer or the Company is responsible for deducting (from employees)& Payment of Tax (to Government).

Supposing, If the employer has deducted lesser amount of tax & tax liability arises in excess of Rs.5000 whether Sec.234B & 234C applies? Can this interest be transferd to employees?

i.e My question is whether Interest under the above sections can be recovered from Employees Salary?

Please clarify.

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3 Replies

NiTiN JAiN (TAX CONSULTANT & CA FINAL STUDENT) (155 Points)
Replied 23 July 2009

Yes your view is right . It is the duty of the employer itself to deduct the TDS from employee & get it deposited within time with the Govt. Employee is not responsible for non depositing the amount of TDS with Govt. He would not also be liable to pay any amount of interest on Tds for not depositing the TDS within time. So employer will only be responsible for making the late payments of TDS & not the employee

Anumanchipalli Sathikonda (Tax Consultant) (1349 Points)
Replied 23 July 2009

Shrilakshmi Raj Ji

and

Nitin Jain Ji

I would like to add some more useful matter to this discussion. Recently Mumbai Bench of Income Tax Appellate Tribunal in the case of Assistanct Director of Income-tax (International Taxation) Vs.Chiron Behring GmbH and Co [2009] 314 ITR (AT) 59 held as under

"By virtue of section 195 all the payjents made to the assessee are subjected to deduction of tax at source. Under these cisrcumstance, the assessee cannot be said to have committed any default in not paying advance tax for which the liability to pay interest under section 234B could be fastened on it. Our view is fortified by the Speacial Bench Order of the Tribunal in Motorola Inc. V. Deputy CIT [2005] 95 ITD (Delhi) [SB]. Respectfully following the precedent, we accept the opinion of the learned Commissiner of INcome-tax (Appeals) on this count in directing to delete the levy of interest under sectin 234B."

One can take the help of the above case, even a resident assessee also as in the case of the Shri Lakshmi Raj Ji.

Best Wishes

Sathikonda

K.chandrasekaran (Partner) (210 Points)
Replied 04 September 2009

By deducting tax on all interest on FD even small interest earning citizens will be forced to submit returns indirectly to get refund.Most retrograde thinking indeed

Even nonasseesses will have to do this useless work and will be going to IT office to meet every one to keep them busy.

It will be source for new way of harrasments as getting certificate will be a source of unproductive work for many.Form 15G& 15H should continue to be valid