Income Tax Department's Focus Sharpens On Variances In TDS And Employee Disclosures, Says Report

The Income Tax department is closely examining differences in TDS by companies and employees' declarations in annual returns. This involves a detailed reconciliation of figures in various categories like house rent allowance, medical insurance, home loan expenses, and Section 80C investments, as per a report by the Economic Times.

Earlier this month, numerous companies in major cities such as Mumbai and Delhi received notices under Section 133C, introduced in the fiscal year 2014-15. This provision grants the custodians the authority to request information for verification purposes. According to sources mentioned in the report, these companies are required to either 'confirm the information' or 'furnish a correction statement.'

The department's goal is to uncover cases where tax has escaped, either due to companies deducting less TDS than required or employees including undisclosed investment declarations when finalizing their ITRs to claim refunds.

The legal responsibility for accurately computing and reporting TDS every quarter rests with employers. Traditionally, companies have not extensively verified employee declarations. In certain cases, employees may not timely submit the necessary documents, as per the report. Service providers, frequently software companies engaged for outsourced payroll tasks, may not perform adequate validation.

In situations where employees submit fraudulent claims endorsed by companies, discrepancies may not be immediately evident in the tax office system. Nevertheless, any disparity between the two sets of information would be promptly detected. If a case attracts the attention of the tax office, it is likely to undergo a thorough examination of the records of all employees.