Tax Deducted at Source (TDS) is an important compliance mechanism in India. Employers deduct TDS from employees’ salaries and are legally obligated to deposit it with the Income Tax Department. However, situations arise when employees discover that their employer has deducted TDS but not deposited it. This issue can cause stress and confusion, raising concerns about tax liabilities and future implications. Many employees wonder – what happens if TDS is deducted by employer but not deposited?
Understanding TDS and Employer Responsibility
TDS ensures that taxes are collected at the source of income. Employers deduct the tax portion every month before crediting the salary to employees. After deduction, they must deposit the collected amount with the government and issue Form 16 annually. When this process is not followed, employees face discrepancies in their Form 26AS or AIS (Annual Information Statement).
Impact on Employees
If your employer not paying tax after deduction, you may notice a mismatch in your tax credit records. This could lead to additional notices from the Income Tax Department. The law states that employees should not be penalized for the employer’s failure to deposit TDS, but the verification process can become complicated and time-consuming.
When employees check their Form 26AS, the deducted TDS may not reflect there. This raises red flags during income tax filing and may even delay refunds. In such cases, employees need to preserve payslips and salary statements as evidence that TDS was indeed deducted.
Legal Consequences for Employers
Employers who fail to deposit deducted TDS face strict penalties, interest charges, and in severe cases, prosecution. The Income Tax Act treats non-deposit of TDS as a serious violation. Employers may also be blacklisted, face disallowance of expenses, and attract heavy fines.
From the employee’s perspective, it is crucial to act quickly if such non-compliance is noticed. Immediately raise the issue with the HR or payroll department and keep written communication as proof. If unresolved, complaints can be made directly to the Income Tax Department.
How to Safeguard Yourself
- Regularly Check Form 26AS / AIS: This helps in early detection of discrepancies.
- Maintain Documentation: Keep payslips, Form 16, and salary statements as evidence.
- Communicate with Employer: Raise queries promptly and request confirmation of TDS deposit.
- Seek Expert Advice: Tax consultants can guide on appropriate actions if legal escalation is required.
AKM Global – Professional Guidance in India
In complex cases where employees face TDS mismatches, consulting professionals can help. AKM Global, based in India, provides expert advisory services to resolve TDS-related disputes, ensuring compliance and guiding employees on corrective measures. Their knowledge of tax laws and employer obligations helps safeguard individuals against unnecessary stress and legal complications.
Final Thoughts
Discovering that your employer has deducted but not deposited TDS is unsettling. While the responsibility primarily lies with the employer, employees must remain vigilant by monitoring their tax credit records. If you encounter issues such as what happens if TDS is deducted by employer but not deposited, seeking professional guidance ensures you are well-protected. Remember, timely action and proper documentation are your strongest tools to safeguard your tax compliance.
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