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Tds on salary

chamarthi venkatesh (Student CA Articleship) (848 Points)

03 December 2018

Dear all,

A company had not deducted TDS on salary for the months of April may june and they are saying there is no problem if we don't deduct tds on salary for first quarter(like relaxation)

Is there any provision which says, no need to deduct TDS on salary for first quarter ?

Please help, I am confused.

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3 Replies

chamarthi venkatesh (Student CA Articleship) (848 Points)
Replied 03 December 2018

The company is saying that, because the employees give their tax payment details only in july(after paying their taxes), they started deducting TDS from July

Nabin Raj Uprety (Manager @ CA Parmeswaran & Co. ) (168 Points)
Replied 03 December 2018

There is no provision like such. TDS on Salary is deducted based on the slabs of Income, so only when all the information like total Income, Investments and Exemption are provided to HR or Account dept, they will deduct the TDS. So there is no wrong on this policy, So TDS will be deducted from 2nd quarter considering income of 1st Quarter too.

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Z ( ) (2960 Points)
Replied 03 December 2018

Originally posted by : chamarthi venkatesh
	Dear all, A company had not deducted TDS on salary for the months of April may june and they are saying there is no problem if we don't deduct tds on salary for first quarter(like relaxation) Is there any provision which says, no need to deduct TDS on salary forfirst quarter ? Please help, I am confused.

S.192(3) The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.

It's by virtue of this sub-section the companies often do not deduct tax in all the months.

However, in some cases, judges have passed strictures on such modus-operandi considering it as misuse of the provision. Since the intention of the lawmakers was to make the adjustments due to difficulty in the estimation of the income and not merely for the purpose of convenience to the deductor.

This modus-operandi can be bothersome to the employee as his advance tax liability and interest thereon might be affected. For eg, the employee was under the belief that the co. will deduct the tax but the co. did not, but since the ultimate responsibility is of the employee, therefore, he would be liable to pay the advance tax and possible interest (if any) instead of payment of tax by way of TDS.

Further, there have been cases where the employer used to deduct all the tax in the months near the end of the financial year owing to which almost no salary was actually paid to the employees, and due to this their economic condition was affected as they have to live by dis-savings. It is cases like this where the court say anything, otherwise, more or less, it's doable.

Therefore, unless this causes some major issues to the employees or the interest of revenue is prejudicially affected, there is nothing to worry too much.

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