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Help with TDS Salary please

$wap$ (Assistant Auditor) (189 Points)

17 May 2010

Dear all,

Tax is not deducted from the salary income on monthly basis. The employer contends that the investment declaration forms are circulated in the month of March and only after assessing the investments made by the employees, tax is deducted in the months of July, August and September. My contention is that tax must be deducted on a monthly basis as per para 6.4 of the circular 1/2010. Refer https://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=CIR&schT=&csId=66f14b2c-6999-45fb-b108-98f733f6186d&crn=&yr=ALL&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws

Can anybody help me on this

1. whether practical problems faced by the company will be taken cognisance of by the IT dept for not deducting TDS on monthly basis?

2. what would be the penalties in doing so?

regards,

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9 Replies

shailendra (C.A. FINAL) (189 Points)
Replied 17 May 2010

hi please refer to the following:-

section 192(3)

The person responsible for making the payment referred to in sub-section (1) 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.

The above provision states that if the company deduct all the TDS as required by the ACT till 31st march of the previous year, then it will not attract penalty even if the company has deducted TDS of the employee only in the month of march.

It is my point of view.

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$wap$ (Assistant Auditor) (189 Points)
Replied 17 May 2010

Thanks for your reply however the circular which I am referring in my posts states in para 6.4 as follows:

6.4 The amount of tax as arrived at para 6.3 should be deducted every month in equal instalments. Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year.

Intention of the government is to deduct the amount monthly. Increase/decrease are minor changes if required.

Other members, request you to present your views with regard to this???

Naveen (Learner) (116 Points)
Replied 17 May 2010

Hi,

Yes, this is the procedure that most of the epmloyers follow and is correct.

TDS need not to be deducted every month from salaries paid to employees. Generally Employer circulate Investment declaration form in the start of Financial year and consider the investment declared for calculation Gross total income of employee.

Employee is required to submit his Investment proof later in the year which may be decided by Employer. For example an Emoloyer may fix deadline for submission of investment proof in the month of Dec. and if employee fails to submit the proof, the tax should be deducted in the salaries of the remaining period of the year. In the given example the employer may deduct tax in the salaries of Jan, Feb and march in equal Instalments.

Or employer may deduct the entire tax payable in the month of March, depending uopn the policy of employer.

However, the importan point to note here is that TDS for the year must be deucted in the same financial year i.e. the TDS for the salaries paid for Apr09 to Mar10 shall be in any case deducted upto Mar10.

$wap$ (Assistant Auditor) (189 Points)
Replied 19 May 2010

@ Naveen: are you sure when you say "TDS need not to be deducted every month from salaries paid to employees."

Can you back that by a relevant circular/notification?

Arjun kumar (Finance officer) (31 Points)
Replied 22 May 2010

hi every body,

while filing TDS challan no.281.I wrongly wrote AY 2011-2012 in place of AY 2010-2011.

i deposited it by net banking.

Plz help me how can i fix it...

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Gopal G (CA Final ) (44 Points)
Replied 22 May 2010

Dear...

The sections 192 to 196 of Income Tax Act, directs “Any person responsible for paying any income chargeable to tax” to deduct income-tax thereon at the rates specified respectively.

Salaries:
While making the payment of Salary, deductor should consider the following and deduct correct TDS from the payment being made.

Calculate the annual Approximate/Actual Salary
1. Calculate the Exact Taxable Salary amount Paid/Payable till current month for the financial year.
2. Calculate the approximate salary that will be paid for rest of the FY, assuming the current month salary for rest of the year salary.
Add any other income reported by the Assessee [Employee].
Deduct if any Loss declared by the Employee, from the annual taxable salary. Note that, only House property loss (interest in case of Self Occupied House Property) should be considered.
Deduct the allowed deductions declared by employee under Section 80C, 80D, 80G, etc.
Calculate the Income Tax, Surcharge and cess on the net Income, as per the “Rates in Force”
Deduct if any rebate U/s 88E or Relief U/s 89. (explain the heads)
Keeping it as total tax, now deduct the TDS made till last month from it.
Divide the net TDS by “Remaining number of months in the FY, including current month”.
Deduct this amount from employees Salary .

go through www.saraltds.com for information about TDS.

A.K.CHATURVEDI (SERVICE) (84 Points)
Replied 25 May 2010

Hi,

in my opinion tds should be deducted in every month depending on the declration given by the employee such as a tax liabiltey is arised after consider all deduction ,tds must be deducted every month

Shudhanshu Agrawal (Business) (2570 Points)
Replied 25 May 2010

Originally posted by : $wap$
	Dear all, Tax is not deducted from the salary income on monthly basis. The employer contends that the investment declaration forms are circulated in the month of March and only after assessing the investments made by the employees, tax is deducted in the months of July, August and September. My contention is that tax must be deducted on a monthly basis as per para 6.4 of the circular 1/2010. Refer https://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=CIR&schT=&csId=66f14b2c-6999-45fb-b108-98f733f6186d&crn=&yr=ALL&sch=&title=Taxmann%20-%20Direct%20Tax%20Laws Can anybody help me on this 1. whether practical problems faced by the company will be taken cognisance of by the IT dept for not deducting TDS on monthly basis? 2. what would be the penalties in doing so? regards,

I agree with the point of view of Shailendra and Naveen. Actually as you know it takes May (appx) to get Finance Bill approved. So most of the employers wait till the month of May for deduction of TDS on salary. After Finance Act is issued TDS on salary is deducted properly. Even if you dont deduct TDS in few months there is no impact as such.

CA Netra (Practice) (117 Points)
Replied 27 May 2010

Hi Arjun,

This kind of mistakes usually happens at the begining of the FY. All you have to do is that write a letter to the concerned A.O. mentioning details of Challan & others. Submit the letter along with proof of payment challans.

Regards,

Netra