Direct taxes form nearly half of the tax revenue collected in fiscal year 2016-17 at 49.66% and exactly 5.60% of the national income/ GDP in the same year according to Time Series data released by the Income Tax Department. Tax deducted at Source or TDS has been a rapidly rising source of revenue for the public exchequer since reaching a whopping Rupees 3,25,000 crore in FY 2015-16.
You need a TDS certificate/ Form 16 to claim any refunds on income tax paid from your salary by your employer. Section 192 and 200 of the Income Tax Act, 1961 make it compulsory for any income disbursed by an employer in the name of “salaries” must show tax deducted at the point of distribution. That means that the duty of paying taxes falls upon the employer. Tax must be paid within the time stipulated by the tax office.
At present, this deduction must be paid by the 7th of each month to avoid late fees and penalties. Each employer must also furnish TDS returns at the end of each quarter. For more information click here.
Secondly, the onus of issuing certificates attesting to the payment of taxes falls upon the employer as well (Section 203A). Form 16 must not be confused with Form 16A. While the former certifies salary income only the latter certifies payment of tax on any other source of income (fees, commission, remuneration etc.). It is possible for a single individual to have both these types of income proofs.
It is best to consult a tax expert if TDS payments have to be made by a firm or business because of the tricky nature of payments and return filing.
According to Section 201(1A), the deductor of tax is to be considered the “assessee in default”. This means that the employer can be fined or penalised on your behalf for not deducting tax at source. The rate of interest charged as fine is not avoidable as the law does not give any scope for a waiver. The rate is 1% per month if no tax has been paid and 1.5% per month if a deduction has been made from your salary but not paid to the tax authority.