Budget shifts onus of TDS default to employer

MUMBAI: Employees will no longer be at fault in case the employer fails to pay tax deducted at source, thanks to an amendment in the current Budget. Instead, the employer will be liable to pay interest and penalty.
The defaulting corporate is liable to face 15% interest on the tax payable and penalty that can go up to 100% of the tax amount.
Earlier, the liability of the company was restricted to cases where it had collected the tax from the employees but failed to remit it to the I-T department. The liability used to be on the employee, if he/she had failed to remit the TDS.
With the present amendment, it has been made clear that the liability for default in TDS payment is entirely on the employer company. Hence, tax authorities can recover the unpaid TDS from the company directly — whether the company has collected TDS from the employee is no more relevant.
The amendment, proposed in sub-section 1 of section 201 of the Income Tax Act, empowers the tax authorities to take action against the company if it fails to comply with the TDS rules. The tax authorities can inform the company about the default and ask it to rectify the matter by paying the correct amount of TDS within 15 days.
The government felt the need for an amendment after the Income-Tax Tribunal, Mumbai, in a recent order in a case filed by ACC, concluded that tax authorities can recover the unpaid TDS from the employee of the company, taking the onus away from the company.