For quick and efficient collection of taxes, the Income Tax Law has incorporated a system of deduction of tax at the point of generation of income. This system is called ‘Tax Deducted at Source’, commonly known as TDS. Under this system tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the government by the payer on behalf of the payee.
However, how should you claim TDS credit in the Income Tax Return if the deductor hasn’t deposited TDS with the Income Tax Department?
Tax experts say a taxpayer should approach his deductor and request to deposit TDS with the government and file a TDS statement. However, he has no legal power to enforce the deductor to do so. Thus, if the deductor has refused the taxpayer’s request, he can submit TDS proof to the Income Tax Department.
“The ITR forms are annexure-less, and hence, a taxpayer cannot attach any supporting documents along with ITR in support of the TDS claim. Thus, it is advisable to file ITR, claim TDS credit and wait for the processing of ITR. Once ITR is processed, the taxpayer will receive a notice of TDS mismatch,” says Naveen Wadhwa, DGM, Taxmann.
Upon receiving such notice, the taxpayer can file a reply and supporting documents showing that the TDS has been duly deducted from his income. The taxpayer can submit the salary slips to support his claim. Further, he can submit the bank statement showing credit of net salary/other income after deduction of TDS.
The Assessing Officer (AO) may allow TDS credit to the taxpayer if the documents submitted are found correct and cancel the demand raised by the CPC. However, if he doesn’t allow the TDS credit, the only option left before the taxpayer is approaching the Court.
It is essential to note Instruction No. 275/29/2014, dated 01-06-2015. The CBDT has directed that as per section 205 the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter- XVII.
Thus, “the Act puts a bar on direct demand against the assessee in such cases, and the demand on account of tax credit mismatch cannot be enforced coercively. This may be brought to the notice of all the Assessing Officers that if the facts of the case so justify, the assessees are not put at any inconvenience on account of a default of deposit of tax into the government account by the deductor,” informs Wadhwa.