I was supposed to deduct TDS of an employee coz his income was exceeding the exemption limit, but i didn't deducted as i thought i will deduct the whole TDS in one short which is my mistake. Now the employee has left the job and the new employer has deducted whole TDS from his salary after considering his income. Now the question is i am in obligation to deduct the TDS but new employer has already deducted the TDS of employee. Now employee wants me to not to deduct the TDS. Whether there will be any penalty on me if i wont deduct the TDS.
15 February 2016
A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit it to the credit of Central Government’s account
Levy of interest– If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201 and shall be deemed to be an assessee-in-default in respect of such tax and liable for penal action u/s 221 of the Act. Further Section 201(1A) lays down that such person shall be liable to pay simple interest
(i) at 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. Such interest, if chargeable, is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.
Levy of Penalty– Penalty of an amount equal to tax not deducted could be imposed under section 271C. Penalty shall be charged under section 221 if deductor fails to deduct and pay tax to the credit of Central Government. The penalty shall be levied to the extent the Assessing Officer directs, however, the total amount of penalty shall not exceed the amount of tax in arrears.
Further under Section 276 B the person is liable for prosecution only if he has deducted the tax nd not deposited it within the due date (not applicable in your case).
It is now for you to determine whether it is worth not deducting the TDS and depositing the same to the credit of Government.
But my question is if the new employer has also deducted TDS on employees salary on which liability was mine, still i have to deduct TDS? even if i know that new employer has deducted the TDS. If so the employee would be in loss as his income is taxing double. But i know if excess tax has been paid then on filling of return the excess would be refunded. Please guide me..
17 February 2016
Being aware of the consequences of non-deduction of TDS, it is for you take a call on whether to deduct TDS or not. As far as the employee is concerned, he would get the refund on TDS deducted in excess. This happens in many cases. Failure to deduct TDS and attendant consequences are applicable to the deductor - who is duty bound to deduct TDS.
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