If the company did not deposit TDS, will the employee have to pay tax again? Learn the rules

RJ Kesari News Desk: If you are employed and file your Income Tax Return (ITR) every year, this news is very useful. Many employees file their ITR based solely on Form 16 and their salary slips. 

However, sometimes companies deduct TDS from an employee's salary but fail to deposit it with the Income Tax Department on time. In such cases, the TDS is not reflected in Form 26AS, and the employee may receive a tax notice.

Recently, the Income Tax Appellate Tribunal (ITAT) issued a significant ruling in a similar case. 

The tribunal clearly stated that if a company deducts TDS from an employee's salary but does not deposit it into the government account, the employee will not have to bear the loss.

What is the matter with Byju's?

This case is related to the education sector company Byju's. According to information, the company had deducted TDS of approximately Rs 1.49 crore from the salary of one of its employees, but did not deposit it with the Income Tax Department. 

It was reported that this problem was not limited to just one employee, but it affected 23,621 employees of the company. 

Because the TDS was not deposited, hence the tax credit of the employee was not reflected in his Form 26AS. Later, when the employee filed his ITR, the Central Processing Center (CPC) refused to give the benefit of TDS and demanded additional tax.

What decision did ITAT give?

The tribunal ruled in favor of the employee, stating that if the company has deducted TDS from the employee's salary, the tax cannot be collected from him again. 

The tribunal stated that the company is solely responsible for depositing TDS. If the company fails to fulfill its obligation, the burden of its mistake cannot be placed on the employee.

What does the law say?

According to tax experts, Section 205 of the Income Tax Act protects employees in such situations. According to this section, if tax has been deducted from an employee's salary, the same tax cannot be recovered from them again. 

Furthermore, the CBDT has previously stated in its directives that if TDS has been deducted but the company has not deposited it, tax recovery action should not be taken against the employee.

What to do while filing ITR?

Tax experts advise that you always check your salary slips, Form 16, and Form 26AS before filing your ITR. If TDS is not reflected in Form 26AS, but TDS is shown in your salary slips and Form 16, there's no need to panic. 

The documents you have are proof that tax has been deducted from your salary. Also, keep your salary slips, Form 16, and bank statements for all 12 months of the year. These documents will be useful if the Income Tax Department asks any questions in the future.