Direct taxes form nearly half of the tax revenue collected in fiscal year 2016-17 at 49.66% and exactly 5.60% of the national income/ GDP in the same year according to Time Series data released by the Income Tax Department. Tax deducted at Source or TDS has been a rapidly rising source of revenue for the public exchequer since reaching a whopping Rupees 3,25,000 crore in FY 2015-16.
You need a TDS certificate/ Form 16 to claim any refunds on income tax paid from your salary by your employer. Section 192 and 200 of the Income Tax Act, 1961 make it compulsory for any income disbursed by an employer in the name of “salaries” must show tax deducted at the point of distribution. That means that the duty of paying taxes falls upon the employer. Tax must be paid within the time stipulated by the tax office.
At present, this deduction must be paid by the 7th of each month to avoid late fees and penalties. Each employer must also furnish TDS returns at the end of each quarter. For more information click here.
Secondly, the onus of issuing certificates attesting to the payment of taxes falls upon the employer as well (Section 203A). Form 16 must not be confused with Form 16A. While the former certifies salary income only the latter certifies payment of tax on any other source of income (fees, commission, remuneration etc.). It is possible for a single individual to have both these types of income proofs.
It is best to consult a tax expert if TDS payments have to be made by a firm or business because of the tricky nature of payments and return filing.
What Recourse Do I have?
- Employees need not run to courts of law every time an employer fails to furnish Form 16 or worse, does not pay your TDS. Often the best recourse is to talk to your employer and remove any misunderstandings if any. There are several fines and penalties prescribed by the law for late payments or non-payment of tax at source.
- If that fails, then you can write or visit the nearest tax office falling under the tax circle associated with your PAN. You need to address the tax assessing officer in charge and apprise him of your liabilities and the employer’s refusal to issue Form 16.
- In case you have received a tax notice claiming outstanding tax dues, file an application for rectification of your income tax return for the same year. Give reasons for the same.
- Newly amended tax provisions provide for a late fee of Rupees 200 for each day that the annual tax return stays “unfiled”. Further an interest of 1.5% of outgoing tax becomes leviable upon the taxpayer.
According to Section 201(1A), the deductor of tax is to be considered the “assessee in default”. This means that the employer can be fined or penalised on your behalf for not deducting tax at source. The rate of interest charged as fine is not avoidable as the law does not give any scope for a waiver. The rate is 1% per month if no tax has been paid and 1.5% per month if a deduction has been made from your salary but not paid to the tax authority.