Finance Bill 2015: TDS FROM SALARIES- PROPOSED AMENDMENT – duty on employee should also be cast to provide proof, evidence, particulars etc. of claims for consideration.

[CA DEV KUMAR KOTHARI]

The proposed amendment in section 192 is reproduced below with highlights for an easy to understand analysis:

Amendment of section 192

40. In section 192 of the Income-tax Act., after sub-section (2C), the following sub-section shall be inserted with effect from the 1st day of June, 2015, namely:-

“(2D) The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.”.

Notes on Clauses:

Clause 40 of the Bill seeks to amend section 192 of the Income tax Act relating to salary.

Under the existing provisions contained in sub-section (1) of the aforesaid section, any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made on the estimated income of the assessee under the head “Salaries” for that financial year.

It is proposed to insert sub-section (2D) in the said section to provide that the person responsible for making the payment referred to in sub-section (1) of the said section shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

This amendment will take effect from 1st June, 2015.

Observations of author:

The language used is mandatory by use of words ‘shall for the purpose …

The purposes can be:

Estimating income of the assessee (that is employee from whose salary tax is deductible)

     or

computing tax deductible under Sub-section (1).

The responsible person is mandatorily required to:

1. obtain from the assessee the

evidence,

or proof

or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

Responsibility on assessee must also be cast:

It is desirable that the assessee that is person receiving income should also be a statutory duty to provide evidence, or proofor particulars of prescribed claims (including claim for set-off of loss) to the tax deductors.Unless such duty is cast upon,it will be on free will of assessee whether to provide the same or not and in such case how employer/ tax deductors can be made responsible.

Request and suggestion to the honourable FM:

The provision should also provide that unless the assessee provide evidence, or proof or particulars of prescribed claims, the tax deductor will not consider the same while computing income or tax deductible.

The employee should be cast upon statutory duty to provide relevant proof, evidence or particulars etc. well within time.

There should also be mechanism for verification of authenticity by the employee by way of self made verification clause.

Rules must be framed and notified as soon as possible.