To strengthen compliance under the tax deducted at source (TDS) administration, Budget 2008-09 has proposed that the net for defaulters be widened. Now, employers or companies, who fail to deduct tax or do not deposit it after deducting the tax or deposit only a part of it in the tax department, will be considered defaulters under the Income-Tax Act.
The provision would be in sharp contrast to the earlier one wherein only employers or companies who failed to deduct TDS or to deposit it after deduction were considered defaulters.
The Budget has proposed that the amendment take place retrospectively from June 1, 2003, making many cases to be reopened and many to be considered as defaulters. The amendment will also include TDS on dividends within its scope.
In such cases, principal officers of companies will be considered defaulters. Most such defaulters are fined and have to pay the TDS amount along with interest. It may also land some in prison, depending on the severity of the case.
Tax officials said the amendment had been brought to bring greater clarity on the issue. The move will also strengthen the TDS net by increasing compliance among companies and employers. Ernst & Young tax partner Amitabh Singh said, ?The move is aimed basically at strengthening compliance amongst companies.?
With finance minister P Chidambaram doling out relief to income-tax payers in the Budget, sources pointed out that it was felt necessary to also strengthen and increase compliance measures to increase tax collections. The government has estimated a 19.7% rise in direct tax collection this year, and kept a budget estimate of Rs 3,64,675 crore in 2008-09 against the revised estimate of Rs 30,4445 crore this fiscal.