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TAX DEDUCTION AT SOURCE AN INTRODUCTION

Income-Tax is payable by an assessee on his income chargeable to tax in accordance with the provisions of the Income -Tax Act, 1961, at the rates prescribed by the Finance Act from year to year. An assessee is required to pay the income-tax by way of advance payment under the concept of "Pay as you earn". The T.D.S. is one of the modes of advance payments of taxes. The T.D.S. correspond s to the expression "withholding tax" commonly used in international tax terminology. The relevant provisions for "tax deduction at source" are contained in Chapter XVII of the Act under the caption "Collection and Recovery". Over the years deduction of tax at source has become the most important an d most effective mode of tax administration and recovery, with the least obligation, hassles and burden on the revenue. No cost is required to be incurred by the revenue for making such a sweet and soft recovery. But, on the other hand, a taxpayer, already overburdened with so many other statutory compliances, has been made to bear and shoulder many liabilities and obligations with no incentive or even the reimbursement of the cost incurred by him in making such compliances, as an agent of the exchequer. As a tax deductor, one is required to have a very vigilant watch on the complete details of the deductee such as whether he is an individual or a company, a senior citizen or not, a resident or non-resident, PAN holder or not and so many things. The deductor is fastened with the liability of timely deduction of tax in all applicable cases and that too at the prescribed rates, to pay the tax so deducted within the prescribed time limit to the credit of the Central Government, to issue certificate of T.D.S. and finally to file the periodical statements of T.D.S. with prescribed authorities. Even a small slippage on the part of a bonafide tax deductor may result into putting him into the shoes of the deductee, making him liable for the amount of tax, which otherwise the payee is required to pay and that too along with interest. The deductor may also be denied the claim of deduction in respect of payment made for computing his own income under section 40a(ia) of the Act . Besides, the deductor may also be made to suffer rigorous of various penalties and even prosecutions in certain cases and many times but not for any fault on his part. Friends, with the laxity and inefficiency in tax administration and tax collection by those who are duly paid for it, innovative ideas are being evolved by the legislatures to expand the provisions and scope relating to deduction of tax at source. Not only, the scope is getting increased day by day but new procedures of electronically filing of T.D.S. returns and making of e-payment etc. have increased the complexity in T.D.S. compliance manifold, especially for small and medium tax payers and tax professionals located in mofusill area. In our country, where at many places power is not available for 10 -15hours a day, compliance through

electronic media is a real challenge. Now a day, the offices of we, the I.T. professionals, have become the offices of other sort of I.T. professionals i.e. of Information Technology. Most of our time is consumed in acting as tax complier only. Friends, the tendency of shifting the burden of the tax recovery on civilians by the tax administrator can be judged from an anomaly that an assessee is required to make T.D.S. on so many payments but the Income -Tax Department has not undertaken even one liability of T.D.S. i.e. on payment of interest on income -tax refunds. They have got themselves exempted u/s. 194A (3)(viii) of the Act on such payments of interest. Friends, despite all the hassles and difficulties, an innocent tax payer is always having threat of T.D.S. Survey u/s. 133A of the Act as also of many and multiple legal proceedings and litigations relating to T.D.S. Many of our assessees are victims of problems relating to non-grant of tax credit due to mismatching, filing and correction of the T.D.S. returns, frequent notices which are being issued by the T.D.S. Officers and also of the Orders u/s. 201 treating the assessee in default. It is a real challenge for Income-Tax professionals to make timely and error free compliance of T.D.S. provisions on behalf of their clients. We hope that it is only a transitory period issue and looking to the fast pace of up-gradation of system for T.D.S. compliance, a very neat, clean and clear T.D.S. administration and compliance system would take place very soon. The theme of the seminar, in which this paper is being presented, has very rightly been selected as "Taxation - A Challenge, requires Knowledge and Wisdom". Here, the paper writer has a humble suggestion that the set of words 'Practical Approach' should have also been inserted to the punch line of the theme. Ultimately, it is the common sense and practical approach (not that practical approach, as we understand some time) which prevails in any tax related statue compliance. The paper-writer has been assigned the topic of 'Practical Issues in Tax Deduction at Source'. The practical issue, in context of the topic, is a very wide term. It covers the examination of the obligations of a tax deductor, various rights and obligations of a deductee, procedural aspects of T.D.S. compliance and, finally, ways of defending notices and orders passed by the T.D.S. Administration Authorities along with consequences for defaults. In the present paper, an attempt has been made to address all Such issues.

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