What if TDS deducted but not deposited by the deductor?

TDS (Tax Deducted at Source) is essentially an indirect way of collecting taxes by the Government of India. TDS can be deducted from your salary, rental income, or any other sources of income by your deductor (for eg, employer). Every deductor who deducts TDS from your income is required to deposit the tax to ITD within the stipulated time.

However, there are several instances where the deductor or employer deducts TDS from your salary or income but fails to deposit the TDS within the specified time limit. Moreover, in some cases, the deductor might furnish TDS returns against an incorrect PAN and for some other reasons as well. So, before you receive a notice of non-payment of taxes, you need to report the issue and take some action.

How do you know if the TDS payment has been submitted or not?

Whenever Individuals or organizations deposit the TDS and file TDS return with the government against your PAN, it automatically shows in your Form 26AS. And the due date to deposit TDS is the 7th of every month. It would not reflect immediately, but you can check after some days of filing the TDS return (TDS returns are usually filed on a quarterly basis).

If you find the details of your TDS are missing in your Form 26AS, at first, it is important to approach your employer or the deductor and request them to rectify the mistake. However, it takes approximately 30-45 days for the rectified TDS credit to appear on your Form 26AS.

In case, your employer fails to correct the mismatch and your Form 26AS remains incorrect, you may file a written complaint with your Income Tax Assessing Officer (AO) from the e-Filing website.

Consequences of non-deposit of TDS

  • If TDS is not deducted then the deductor has to pay interest at 1% per month or part thereof from the date on which TDS is deductible to the date TDS is actually deducted.
  • If TDS is deducted but not deposited within the due date interest at 1.5% per month or part thereof from the date on which TDS is actually deducted to the date TDS is actually paid.

When can the TDS refund be claimed?

TDS refund can be claimed when the amount of tax that is payable in a year is less than the amount already deducted as TDS, or if the tax liability is below the exemption limit and yet TDS has been deducted.

What is Form 26A?

If the deductor fails to deduct the whole or any part of the tax (TDS), then the deductee shall not be deemed to be an ‘assessee in default’ for the particular failure of TDS. So, in accordance with that, the tax deductor furnishes a certificate from an accountant or CA, which is Form 26A.

Form 26A is to be submitted by the deductor to the Income Tax Department so the deductee is not in default and a penalty is not payable by them.

If any queries, ask them out!