On July 24, 2010, the Finance Minister released Citizen’s Charter — a declaration of Income-Tax Department’s commitment to taxpayers. In this Charter, one of the commitments is to make compliance easy. In this background, one of the members of the CBDT has issued a D.O. letter dated June 18, 2010 to all Chief Commissioners of Income Tax, concerning giving credit for tax deducted at source (TDS). At present, a large number of lower- and middle-income taxpayers face the problem of their refunds being withheld.
One of the convenient methods of tax collection is deduction of tax at source in accordance with the provisions in Chapter XVII of the Income-Tax Act, 1961 (Act). Section 200 of the Act lays an obligation on those making various sorts of payments to deduct tax at source in accordance with the provisions of the Act and pay the same to the Central Government account within the prescribed period, furnish a statement to the tax authorities, as mandated by Sections 203AA and 206 and give a certificate to the tax deductee, as required by Section 203.
The tax so deducted is treated as tax paid by the assessees, for which they are to get credit in their assessments, and if any excess is found, the same is to be refunded to the taxpayers.
Over the years, the practice has been that on the basis of TDS details in the income-tax returns, the assessing officers (AOs) concerned give credit for TDS after verification, and the taxpayers were not required to make any further compliance on this count.
New order
This practice, however, will change because of the aforesaid D.O., which now prescribes that in the case of missing credits (mismatch) noticed by the AO, the taxpayers should contact their deductors and ascertain from them whether the deductor has either (i) erred in quoting the correct PAN; or (ii) not filed the TDS return; or (iii) has not paid the required TDS to Government’s account.
They may persuade the deductor to rectify the deficiencies. For ascertaining deficiencies, the taxpayers have been advised to access the CBDT’s Web site and then approach the AO for getting the deficiencies/omissions rectified.
From the above, it is apparent that the CBDT is causing onerous and unreasonable burden on taxpayers as per the D.O. letter. Taxpayers have no authority to compel the deductors to send communications to the tax department for making up the deficiencies or correcting the same.
Approaching them for getting the needful done could be a time-consuming exercise, causing considerable hardship and inconvenience to the taxpayers.
They have no role to play in the matter of TDS and the only right they have is to get the TDS certificates. Many lower- and middle-income taxpayers, in whose cases tax is deducted at source, are not computer-literate-enough to get the requisite information from the Department’s Web site, check the correctness of the TDS figures and then approach the deductees to inform the I-T Department for requisite corrections.
The stock reply that the taxpayers get from the deductors is that they have furnished the relevant information in the statements and that the I-T Department may be contacted for further clarifications.
The result is that the taxpayers are caught in a dilemma and their refunds get unduly delayed.
The CBDT has to devise a scheme by which monthly reconciliation of such deficiencies can be made by the Department’s TDS branch from the banks/accounts officers, and the AO informed accordingly. Casting the burden in this regard on the taxpayers is unjustified, unfair and a form of harassment, especially as they are not a part of the TDS system. Also, deductors, committing mistakes in the TDS statements and in making payments need to be sternly dealt with by penalty and prosecutions under Section 271C, 271CA, 276B and 276BB.
Such instructions from the Department, passing the burden to taxpayers, can be highly counterproductive, affecting voluntary compliance and taxpayer-tax administration relationship. Hence, the scheme outlined in the D.O. letter of June 18 needs to be urgently reviewed to devise a practical way to stop withholding of refunds in large number of cases.
The article expresses concern about the taxpayer;s plight. After all the deductor is only an agent of the government by virtue of the provisions of secs. 192 etc., and for the failure of the agent, the innocent tax payer cannot be put to hardship. It is for the government to take up the issue appropriately and see that the deductor (agent) does his job correctly!
sir
PUNJAB NATIONAL BANK DEDUCT Rs.1923/- as TDS FROM MY FD A/C.MY CORRECT PAN NO. IS GIVEN TO THE BANK.
NOW MY 26As A/C IS NOT Showing this amount.I do not know that BANK has or has not deposit that amount to the income tax department. BANK Says :we have issued form 16A to you, go to the income tax department. I do not know what is this going on. WILL you Pls. help me.
Thanking you
Manju Gupta LIC Agent
further to my 02 sept 2010 posting. A new directive has come from the desk of Chairman CBDT(as listed in taxguru d/d 09 may 2011) asking CITs to remedy the situation by 20 may 2011 by making deductors accountable. It gives a great sense of relief to honest tax payers(deductees) who had been thrown at the mercy of deductor ‘thanks’ to an earlier thoughtless D O letter from a member of CBDT.I dont know if comments in taxguru have helped in this. But what needs to be appreciated is the chairman CBDT’s resolve to solve a perennial problem. Honest tax payers must congratulate the Chairman on his clear thinking. I do hope that many such actions from him will follow .
We are all individually comlaining to the authorities. What everyone is ignoring is where the TDS shortfall is going? The bank is religiously deducting the TDS from the deductee’s account right up to the penny, but it is not reaching the government as the records are showing.
Where is the money going? Most PSU banks have outsourced their TDS operations. They squarely put the blame on the third party they outsource to. How can banks be even allowed to outsource TDS operations? I see the potential for a huge collaborative scam even if there is an error of Rs. 100/- per assessee. Do you not see that too?
In this country the citizens are not loyal, because the country(administrators) are not loyal to the citizens
First things first.let us compliment the i t o mentioned by ca pmr gowrishankar in his posting d/d 25 aug 2010 at 0931 pm. tax guru may please bring it to the notice of the cbdt official who sent that d.o.letter putting the onus of rectifying mistakes of deductors, on the deductees. may be, cbdt may see that this i t o’s action is a model for all i t os and may issue fresh instruction binding all i t os to take similar action as a standard practice. thnks to tax guru for having facilitated this discussion up to this stage.commendable service to hapless tax payers.
Really good article, I strongly disagree with this order, ICAI has to represent on behalf of Tax Payers of India.
Good article. Really a big problem for the big assessees to get their refund.
What is the remedy? Nobody knows. But one Income-tax officer(TDS)
is sending letters to the ‘Deductors’ to rectify the mistakes like quoting
of wrong PAN, name, etc while filing the e-TDS returns so as to benefit
the ‘Deductees’ but the letters are sent only to the ‘Deductors’ in and
around her jurisdiction. What about other Deductors ? Will the department
take steps to send letters to all the Deductors, whose returns have been filed
with mistakes?
The response to the article can articulate the apathy of honest tax-payers in the Country.
I fully agree that why the onus should be on tax payers as tax payers quite often account for or considers the TDS from bank statement either available electronically or in hard copies. I think if the tax payer have such copies the IT officials must give immediate cognizance to the same and take up the issue with such defaulting tax deductors. Afterall, if they are getting tax from the tax payer, they should provide services and respect to such tax payers.
Assessee may file application for rectification under section 154 of the I.T.Act claiming balance refund which was deducted by the deductor enclosing therewith a copy of TDS certificate in original.
I fully agree with Mr. PC Sinha. Let the agreived deductee send a copy of the letter, addressed to the deafulting deductor, and the IT deptt.issue penalty/ prosecution show-cause notice to the deductor, I am sure the deductee will get his/her TDS detail matched with NSDL records. One more advice to agreived taxpayers- pl. contact your AO directly and if he/she doesn’t listen, go to the next higher authority and try first to set right the erring or irritant AO and then look for solution of your problem. Don’t lose heart, if you are a honest taxpayer. you are sure to get your refund back with due interest soon after you adopt this course of action. You may alternatively use the wonderfull weapon called RTI Act, 2005 and you are 100% to succeed.
Really a good article. i had always felt that this is a retrograde step by the dept. putting the assessees at the mercy of the deductors, and was wondering why this issue has not come up so far for voicing the grievance. Perhaps only when the assessee feels the pinch of it they may realise, and now the pinch is slowly felt.
I fully endorse the view of the author. The deductor deducts tax at source on behalf of the Income tax Department and it is the duty of the I T deptt. to give credit of taxes deducted to the taxpayer. The proper course should be that once the taxpayer writes to the Tax deducter about the errors a copy should be sent to the IT Deptt. and the Deptt. must follow it up. The tax Payer has no control over the deducter who is actually collecting taxes on behalf of the Deptt. This will go a long way in reducing harassment and improving image of the Deptt.
How come the tax authorities are planning to penalise the deductees for the defaults of the Deductors of Income-tax in not filing the STATUTORY TDS RETURNS BY PROPERLY INCORPORATING THE CORRECT DETAILS ???. By Administrative Orders, whether these tax authorities can trangress the provisions of the I.T.Act, 1961 and Rules, to pass on the responsibility on the Deductees ??
I totally endorsed the views expressed by friends that the Deductee cannot be held responsible for non compliance of filing statutory Returns by the Deductor. Do the Tax authorities thing that besides honestly paying taxes, filing the Returns etc., the Deductees should also undertake the responsibility of ensuring TDS compliance of the Deductee ???????????
Many of the deductors who have deducted tax are not uploading the information on NDSL web site for FORM 26AS. I have FDs with PSU banks and reputed companies which includes TATA group also . Some of my TDS is information are not appearing in FORM 26AS while others are with remark as U Unreconciled. I have taken up the issue with bank and compnay but no solution. There should be penal provsions for defaulting deductors for not putting TDS information on NSDL web site.
I fully agree with what is stated in the article. It is apparent that the Department just wants to collect the tax and itself does not want to take any steps if there is any mismatch in taxes deducted on behalf of hapless taxpayers. It has ample powers under the Act to get the needful done and instead throwing the responsibity on the Deductee. This unfair treatment of Taxpayer is contrary to the pious and hollow statements in the Tax Payer’s Charter. The Department is requested to immediately allow TDS Credits once evidence is provided by the Taxpayer.
There is nothing wrong in CBDT asking the deductees to get their TDS reconciled with the deductor. The deductors are not responsible to check the correctness of the remmittance of TDS and the form No. 16 or 16A. Issuing form 16 and 16a is a ritual and it passes by. The refund money is with the IT Dept and it cannot be given back because there are so many expenditures to be met by the government. We are the citizens of India and it is the duty of every middle class citizen to pay tax and not ask for refund because the rich are not obliged to pay tax ( can evade ) and poor do not fall under the act. We the People should adjust as we have been doing all along, maintain silence. Mera desh mahan.
It is a tragedy, in the country where elected representatives disrupt parliament proceedings to get their salary hiked but the electorate being tax payers can not voice their inconvenience casused by hasty and faulty computersation of Income Tax department.Those bureaucrats working in the CBDT should apply their minds consciously to ground realities before issuing such letter to subordinates.It is unfair to victimise the taxpayers for faulty and hasty computersation.
Surely the article will open the Pandora’s box. The D.O. Letter is highly unwarranted as far as the assessee is concerned. It is not the responsiblity of the assessee to approach the Deductor to rectify the mistakes if any. Even it was the practice of the deductors to show little response to any Income tax department’s notice or letter. How can one expect response from the deductee’s request. CBDT is to redress the difficulties and hardships of the honest taxpayers and by this D.O.letter they are augmenting their greivance and seems letting the dishonest deductors off the hook. Further it may induce the deductors to be more careless in adhering the formalities of the TDS.
I agree that the onus of incorrect TDS certificate issued to the deductees should not fall on the tax payers.It is the prime duty of the deductors to take every precaution while deducting,depositing and qouting the right pan number etc.I myself am a victim of this and have been pursuing my company for the same to correct it but my company has been taking it very lightly and I have no authority to dictate them.It can only be done by someone who has authority to dictate and discipline them.The tax refunds of my last three years is stuck for a single mismatch in each TDS.
sir
PUNJAB NATIONAL BANK DEDUCT Rs.6008/- as TDS FROM MY FD A/C.MY CORRECT PAN NO. IS GIVEN TO THE BANK.
NOW MY 26As A/C IS NOT Showing this amount.I do not know that BANK has or has not deposit that amount to the income tax department. BANK Says :we have issued form 16 to you, go to the income tax department. I do not know what is this going on. WILL you Pls. help me.
Thanking you
vinod kumar bansal
I.T.Dept.should initiate a surprise verification check at the TDS deductors premises to ascertain the correctness and the actual payment of TDS to the Govt. If such a scheme is implemented then the TDS deducted will be more vigilent to pay timely dues to the Govt. and also furnish the relevant TDS details correctly.
I am one of the victims of this arbitrary and unethitical provision made by the Government. Myself and my wife had made Deposits with Post Office under Senior Cuitizens scheme. Postal Authorities deducted Income Tax at Source and issued TDS certificates. Xerox copies of the TDS certificates were duly attasched with I. T. Returns. I. T. Dept. did not allow credit for the tax deducted at source and demanded tax together with interest and penalty. We filed petitions u/s 154 of I. T. Act encl9osing original TDS ceertificates. AO, however showed his inability to do any thing. We made petitions under RTI Act, both the Post Master General and Commissioner of Income Tax. We are moving prom pillar to post for last one and half year with out success.
To save our selves from further harrasments we has closed the accounts and with drawn deposits.
What would happen to the deductions already made? We only hope som sense and logic prevails on the I. I. Department and the make necessary amendment in the law to save honest and law adiding citizens from unnecessary and uncalled for harrassment.
Why does not I. T. Dept. imposes interwest and penalty of the Tax Deductors?
If their system is not full proof the department should defer the new provisions untill every thing is set right.
Lasst but not the least I compliment you on this timly and down to earth article.
Regards
Satish
One of the canons of Taxation is to rob Peter to pay Paul; here in the TDS regime it is to punish Peter for the fault of Paul. It is toatlly unfair to direct the Dedutee to approach the Deductor if the TDS is not found in Form 26AS. In my opinion the Department has to question the deductor if the discrepency is brought to it’s notice by the deductee and penal proceedings are to be initiated immediately; then only the dedutors will file the e-TDS returns correctly.
We have not yet recd the refunds for last 2 years : 07-08, 08-09
Now also submitted returns for 09-10.
This means total 3 years refunds pending with govt.
And now after reading this I think the AOs have one more reason to delay it … so guys forget about refunds !!!
This article has hit the nail on its head.
Having the banks pursue correction had been a futile exercise. For some reason the bank claim of no knowledge how or what to do since the issued of TDS Cert. are out source to a CA company.
In several cases the computer printout of TDS from the bank does not much the TDS cert. issued by the out source CA given to the client of the Bank.
Ass. Year 2008-2009 refunds are not being issued instead demand letter are being sent by AO which amount to harassment.Revise request & delete by the assessee of the demand by submitting the original TDS Cert to the AO.
then, one pray to the Lords that it gets processed & refund sent. Here also persistence of visiting ITO or bakshis the only recourse in getting the refund issued.
Amen!!!!
I fully agree. If CBDT cannot discipline the deductors like banks,govt departments and other employers etc they better scrap the TDS. The present circular of the CBDT will lead to fradulent submission of 15H forms. It may also lead people not depositing in banks and go in for alternative investments like buying gold, jewelery etc. It is absurd for CBDT to abdicate its disciplinary powers. It is possible for taxpayers somehow beg/persuade the banks etsc to issue correct 16A forms with PAN indicated and income tax officers should be accept those 16A forms. Otherwise it is tantamount to the government misappropriating taxes paid. Institutions like TAX Guru should take it up with the government. Somebody should sue the government on this.
In case a Company deduct the tax at source and neither deposit with the authorities nor provide TDS certificate to the concerned person / company, how will the instructions of the said D>O will help the Assessee. Some penal action must be initiated against the defaulters and give necessary credit to the assessee. For consideration
Very well written article. Thanks. I entirely agree with the views expressed here.
The D O letter opens one more window to the I.T. Dept. employees to delay issuing refund and also to raise a demand for tax (where no tax is due to be paid on account of the TDS), for obvious reasons.
There are instances when unscrupulous employees of the I.T. Dept. offer to overlook the deficiencies in the TDS system and issue a refund, of course at a ‘price’. All this, for no fault of the taxpayers.
It is high time that the deficiencies in the TDS system are sorted out by the Govt. in consultation with the tax deductors, and not to pass on the burden to taxpayers.
Sir,
I have been running from pillar to post for the last one year for geting my refund for the assessment year 2007-08.
The contract with the deductor has been terminated and they are least bothered. Even, they have neglected to reply to department’s enquiry.
Tax payers are a prey in the hands of the Department.
There is a need to compansate the assessee by way of enhanced rate of interest.
very true. The burden of asking the deductors to correct their tds statements should not be shifted on the deductees. Its the duty of the department to see whether correct return has been filed or not. The deductee at the most can produce TDS certificate from deductor and once he produce it before the A.O then he should be given due credit of tax as shown in the certificate.
If there is any mismatch between tds statement and certficate then deductor should be penalised and be asked to correct his tds return
This DO Letter is against honest tax payer and every body including Institute of CA should take necessary steps to protect the interest of tax payer.
Yes, I strongly agree that it is the deductor and not the deductee to ensure proper compliance of TDS formalities.
How can taxpayers resposibility to compel their boss. If this happens then withdraw the section 192. All salaried people will pay SA Tax.