TDS regulations: The Center has loosened the requirements for businesses to deposit Tax Deducted at Source (TDS) on employee pay, which is a huge comfort to enterprises. Beginning on October 1, 2024, employers will have an extended period of time to deduct Tax Deducted at Source (TDS) from employees' salary. The updated regulation offers companies greater time to make TDS submissions to the government beginning October 1. 

The amount that businesses withhold from their employees' paychecks and send to the government is known as TDS, or Tax Deduction at Source. Employers are required by the Income Tax Act to deduct TDS on pay income in accordance with the applicable slab rates. Generally, the seventh day of the month after the month it was taken from the employee's pay is when the TDS must be deposited.

Employers will have an extended period beginning on October 1, 2024, to deduct Tax Deducted at Source (TDS) from employee pay. The updated rules provide businesses an additional 20 days beyond the prior deadline to deposit TDS, allowing them to do so until the TDS return filing deadline.

Before getting a notification of default, firms have to deposit TDS within 60 days. However, with the new standards, enterprises now have the flexibility to complete TDS deposits by the TDS return filing deadline, thus escaping fines.

Businesses now have longer deadlines to submit TDS payments to the government thanks to recent modifications to TDS legislation. Companies gain from this modification without sacrificing employees' TDS credits. However, if the deducted taxes are not deposited by the deadline, the income tax department has the right to send the firms a prosecution notice for their late submission of the TDS report.

What happens if the employer fails to pay TDS?

When an employer deducts TDS but neglects to deposit it, employees are not eligible to receive TDS credit. Employees are shielded from double taxation in certain circumstances under Section 205 of the Income Tax Act, provided they can prove the TDS deduction was made from their income. People must provide the income tax department with proof that tax has been withheld from their wage in order to claim TDS credit and avoid incurring any further tax obligations.

Bombay High Court Ruling

The Bombay High Court ruled on September 10 that an employee's employer cannot be penalized for failing to deduct tax at source (TDS) from their wage. This verdict is clear and unconditional. This ruling established a significant precedent, specifically addressing the situation of Tata Consultancy Services workers who had received demand notifications from the Income Tax authorities about disparities in TDS claims.

Moreover, the problem went beyond TCS as the Income Tax authority sent letters to former Byju's edtech workers for unpaid TDS. This position was reaffirmed in April by the Mumbai bench of the Income-Tax Appellate Tribunal (ITAT), which made it clear that it is the employee's responsibility to prove TDS with regard to salary income and not the employer's.

"We find that the mandate of Section 205 is quite clear: the assessee shall not be required to pay taxes himself to the extent that tax has been deducted from the assessee's income. The provision's object and purpose is to ensure that when an obligation to deposit the tax, as in this case, is on the employer and the employer defaults, the liability to pay such tax cannot be shifted to the employee," the Bombay High Court stated in a recent order.