Many of you might have already received SMS alerts from the Income Tax Department regarding TDS (tax deducted at source) deduction on salary. This is part of the tax department's initiative to launch a new SMS alert service for salaried taxpayers. The service was launched on October 24.
Here are 10 things to know:
1) As many as 2.5 crore salaried taxpayers will now receive SMS alerts from the Income Tax Department regarding their quarterly TDS deductions. The tax department plans to offer this facility on a monthly basis and extend the service to 4.4 crore non-salaried tax payers.
2) The tax department has asked taxpayers to update their mobile numbers in their tax e-filing accounts so that they can receive this service.
3) Tax experts have welcomed this initiative, saying that it will help increase transparency. "A common case is when TDS is deducted from your salary but deposited with an incorrect PAN. Or employer fails to deposit TDS and hence the employee cannot take credit of it. Many a times when people switch jobs, TDS deducted by two employers falls short of their actual tax liability," said Preeti Khurana, chief editor of portal ClearTax.
4) TDS mismatch is one of the most common reasons for incorrect tax returns being filed, say tax experts.
5) "The new service will benefit the employees as any such inconsistency can be traced well in advance and the employee can approach the employer to rectify those. Earlier, the employee would have to wait till the year end to get the Form 16 and check if all the TDS credits are duly recorded particularly when the employees are not aware that they could view the Form 26AS on a real time basis," said Sandeep Sehgal, director tax and regulatory at Ashok Maheshwary & Associates LLP.
6) TDS deducted on your salary as well as other payments can also be viewed by downloading Form 26AS from the tax department's website.
7) Under TDS, tax is deducted at the origin of income. For the salaried class, the tax is deducted by the employer and is remitted to the government on behalf of the employee.
8) The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc.
9) The employer is required to compute at the beginning of the financial year, the total salary income payable to an employee during the financial year. After considering the exempted incomes, deductions and relief, the tax liability of the employee is determined on the basis of tax rates in force for the financial year. Every month, 1/12th of this net tax liability as computed above is required to be deducted as part of TDS.
10) The responsibility to deduct tax from salaries arises only at the time of payment. Thus, when advance salary and arrears of salary are paid, the employer has to take the same into account while computing the tax deductible. Similarly, if the employee makes certain investments which qualify for deduction or rebate and furnishes the required proof which reduces the tax liability, the employer can accordingly reduce the quantum of TDS. From this year, the tax department has introduced a new form - Form 12BB - which will be used by employees to declare their investments and claim tax deductions.