Tax payment by employee on his own Vs refusal to accept this payment by employer

[caservieces]

 :)  ;D   
My friend working for a 'BIG' indian had bitter experience last year. Keeping that in view he wants to pay the Income Tax on his own through challan and inform his employer- rather than the employer deducting the TDS
- paying / not paying the amount inspite of issuing Form 16
-filing imporperly / not filing e-tds return.
If he pays on his own both the above 2 possible errors and mind consuming exercises can be avoided.
But his employer is not agreeing to the above proposal.
He says that he is under obligation to deduct hence he wants to deduct.
kindly advise whether there are any legal remedies to the employee under these circumstances.

[ashutosh majumdar]

I am afraid the employer may be right. S. 192 imposes an obligation on the employer and does not give him an option to not deduct tax at source. S. 192 (2B) reads as follows:

[(2B) Where an assessee who receives any income chargeable under the head "Salaries" has, in addition, any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head "Income from house property") for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1) the particulars of—

             (a)   such other income and of any tax deducted thereon under any other provision of this Chapter;

             (b)   the loss, if any, under the head "Income from house property",

in such form and verified in such manner as may be prescribed28, and thereupon the person responsible as aforesaid shall take—

               (i)   such other income and tax, if any, deducted thereon; and

             (ii)   the loss, if any, under the head "Income from house property",

also into account for the purposes of making the deduction under sub- section (1) :

Provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head "Income from house property" has been taken into account, from income under the head "Salaries" below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account.]

As you can see, the employer can increase the tax deductible but he cannot reduce (except where the loss is from house property) the tax deductible.

If your concern is that the employer will deduct and not pay up to the Govt, you don't have to worry because you get an indemnity from paying up the TDS. Just keep your Form 16 handy.

[satyanveshi]

In my opinion, the employer can ask the employee to show the challan evidencing the amount paid to the department equalent to the amount supposed to be deducted for not only for that month but also next two months. Please see sec. 191 which says that if TDS is not deducted by deductor and the said tax is not paid by the deductee also, then only the deductor can be treated as an assessee in default. Once the employer demands for challan which evidencing that equalent amount has been deposited by employee, then it can be treated that amount has been paid by the assessee direct. Therefore, the question of treating employer doesnot arise. Further, it is well settled that interest u/s 201(1A) can be levied only till the date of payment of such tax either by deductor or by the deductee. Since the employer is demanding to show challan evidencing payment for next two months also, there is no question charging any interest u/s 201(1A). If the request of the employee is taken on paper requesting not to deduct tax and it will definitely serve the purpose of penalty u/s 271C. Nobody can levy any penalty when there is no revenue loss at all. As  expressed in the question, since TDS from department side is not stabilised and proper credit is not allowed in the assessments of the deductee by one reason or the other, the above method can safely be followed if the employer is ready to face various questions raised by the IT authorities.