TDS deposit rules for employers relaxed from Oct 1, 2024: Does this put employee's TDS credit at ris

The government has relaxed the rules related to companies depositing the TDS from salaries of employees. These rules relate to the time limit within which companies or deductors have to deposit TDS (deducted from payments made by them) with the government before the prosecution notice is sent. Normally, the due date for deposit of TDS with the government is the 7th of the month following the month in which it is deducted.

Employees may be worried that the relaxation in TDS compliance given to companies might impact the timely deposit of the tax against their respective PANs. Recently, there have been cases of companies such as SpiceJet and Byju's failing to deposit TDS with the government in time leading to employees facing income tax problems.

Earlier, the companies had 60 days from the original due date to deposit the pending TDS (tax deducted at source). But from October 1, 2024, the new income tax laws give companies more time to do this. From October 1 onwards, companies can deposit TDS with the government till the deadline to file the TDS return. However, if the TDS is deposited after the original due date then, penal interest would have to be additionally paid. This means an additional 20 days to make the TDS deposit i.e., 60 days from original due date plus 20 more days.

The income tax department will now send a prosecution notice to the company if the TDS is not deposited by the due date for filing the TDS return. Earlier, a prosecution notice would be sent after the expiry of the 60 days from the due date for depositing the TDS. The notice will be sent if the TDS amount exceeds Rs 25 lakh.

Here is an example to understand this: Your company deducted tax from your April salary. According to the income tax laws, the last date to deposit the tax deducted in April is the 7th of the following month which is May 7 in this case. The last date to file the TDS return for the tax deducted in April, May and June is July 31.

According to the earlier laws, if the company failed to deposit the tax deducted by July 7 (60 days from the due date of May 7), the income tax department would send the company a notice asking why it should not be prosecuted. Under the new TDS laws, the income tax department will send the prosecution notice if the company fails to deposit the TDS, along with the penal interest, by the TDS return filing deadline - July 31.

As per the income tax laws, the tax deductor is required to deposit the TDS dues on or before the seventh of the subsequent month except in April. For government employees, the March TDS is deposited on or before April 7; for others, it is April 30.

New TDS deposit rules: Impact on employees

The new TDS laws allow companies extra time to deposit the TDS with the government. However, the question arises whether the new law will adversely impact employees. Many employees do not usually review their Form 26AS and Annual Information Statement (AIS) regularly during the financial year to check whether their employer has deposited the tax deducted from their salary against their PAN.

They usually check their Form 26AS and AIS in the subsequent year, while filing their income tax returns. In cases where the employer fails to deposit the TDS, the employees are often shocked when they see Form 26AS and AIS. There have been media reports that employees of Byju's got tax notice from the income tax department regarding unpaid TDS dues. Recently, SpiceJet has admitted that TDS dues are unpaid between April 2020 and August 2023.

Pranay Bhatia, Partner & Leader, Corporate Tax, Tax & Regulatory Services, BDO India, says, "The new TDS laws provide extra time for companies to deposit TDS dues with the government. While this relaxation will help companies, it will not adversely affect the employees' TDS credit. The income tax department can still send the prosecution notice to the companies if they fail to deposit the tax deducted on or before the due date to file TDS return statement."

Naveen Wadhwa, Vice President of Research and Advisory Division, Taxmann, says, "The relaxation of TDS laws from October 1, 2024, offers companies extra time to deposit TDS along with the penal interest before the prosecution notice is sent. However, the new TDS laws will not adversely impact employees' TDS credit against their PAN."

What if TDS is not deposited against your PAN

There have been media reports about employers deducting TDS from their employees' salaries but not depositing them with the government. Due to this, many employees were not able to claim TDS credit while filing their income tax returns.

Wadhwa says, "Section 205 of the Income-tax Act prohibits tax recovery from taxpayers, provided tax is deducted from their salary or any other income but not deposited with the tax department. However, taxpayers must provide proof to the income tax department that tax has been deducted from their salary. This will help individuals to claim TDS credit and avoid additional tax demand."

Source:-  The Economic Times