The tax authorities can suitably modify the rules to obviate the need for issuing TDS certificates, which will be a great service to the taxpayers in general and tax deductors in particular
However, the harassment caused to the taxpayers by the system of TDS is so acute that it is a perennial pain in the neck. Though present guidelines stipulate that TDS certificates are required to be issued to the bank depositors every quarter, not a single public sector bank (PSB) complies with this requirement. And the worst part is even at the end of the year, you may have to visit the bank’s branch at least three to four times to get your TDS certificates. And many times, they are either incomplete or do not match with the tax deducted, so much so, many depositors are virtually driven to the wall with no help to solve the problem.
Why TDS certificates are required at all?
So my basic question is why do we need TDS certificates at all? As per the present rules, when tax is deducted at source, the deductor is required to issue TDS certificate in a specified format with all sorts of serial numbers and details, which are required to be filled up in the tax returns. But these TDS certificates have neither any sanctity nor any utility for the following reasons.
Even after deducting tax at source, there is no guarantee that such tax deducted has been remitted to the government, as it has happened in the case of some big corporates and the employees have suffered for no fault of theirs. And there are many instances, when the tax deducted does not go into your account simply because the permanent account number (PAN) mentioned while filing the TDS return is wrong due to which it goes to the credit of somebody else. Unless the tax deducted is remitted into government coffers and correctly credited under your PAN, the taxpayer does not get credit for the tax paid and the I-T department simply goes by what is shown in Annual Tax Statement (Form 26AS) available in their website. And the I-T department wants every tax payer to go through the Form 26AS and ensure that the tax paid by them including the TDS matches with what is mentioned therein, as the tax payer can claim credit only for what is shown therein. So what purpose is served by issuing TDS certificate, if the tax deducted is not remitted to the government by the deductor or not correctly credited into your PAN account?
Besides, the TDS certificates have no utility as no attachments are now required to be submitted along with tax returns and hence no useful purpose is served by issuing TDS certificates to the taxpayers. The tax authorities can suitably modify the rules to obviate the need for issuing TDS certificates which will be a great service to the tax payers in general and tax deductors in particular.
However, for the benefit of the taxpayers, banks can be asked to furnish compulsorily in their statement of accounts issued or passbooks written up in the first week of April every year, the details of interest paid and TDS deducted thereon, if any, during the previous financial year by making changes in their computer systems to make it automatic without any manual intervention. This system is followed by some foreign banks and it serves needs of depositors very well and keep the depositors informed about the quantum of interest paid and tax deducted in their account to file their tax returns.
As for the employees of all organizations, it is sufficient if the employer mentions the tax deducted at source during the month and the cumulative total till that month in every pay slip, which itself serves as a record for the employee to file their tax returns. Issuing of TDS certificates is a huge paperwork for large organisations like banks and many information technology (IT) companies, which is very redundant and can be easily dispensed with, without any loss of revenue to the government.
The government should, however, tighten the screw against those who deduct tax at source and fail to remit the amount to the exchequer. If any tax payer finds that the tax deducted is not remitted to the government or not credited to his PAN account correctly, he or she should be encouraged to report to a specialised cell in I-T department, who should take the matter with the concerned deductor with the seriousness it deserves.
I-T dept should facilitate filing of tax returns right from April every year:
There is another distinct advantage for the tax payer if TDS certificates are totally dispensed with. Today you cannot file your return of income unless and until you get the TDS certificates from your bank or your employer, as you are required to fill up the unique serial number of the TDS certificate in the tax return. Without this the tax return is incomplete and does not get accepted by the computer while filing returns on-line. And banks and companies do not issue these TDS certificates till the last week of May or first week of June, as they can issue these certificates only after they file their quarterly TDS returns with the Income-tax dept., which they can do till 15th of May every year. So a taxpayer cannot file his tax return in April or May, though he is ready to file his return and get rid of his statutory obligation as early as possible, particularly, when he has to receive a refund from the I-T department, as the earlier you file the return, better the chances of getting the refund early.
So dispensing with TDS certificates will be the best thing to do in the interest of tax payers. Besides, to file your tax returns in April-May every year, it is necessary that the I-T department should notify the tax returns applicable for that year by the end of the previous financial year. It should ensure that all tax deductors file their annual TDS returns with the I-T department by the 15th of April every year, so that the completed Form 26AS is ready in their website by the middle of April to facilitate viewing by taxpayers.
For the financial year ended 31 March 2015 (AY 2015-2016), the I-T department has just a few days back notified an elaborate return, which is held in abeyance as of now at the instance of the Finance Minister, and a revised format is expected to be notified shortly. But the department should ensure that the requirement to fill in the unique numbers of TDS certificates in the I-T return should be suitably deleted if the authorities agree to this suggestion to abolish the present system of issuing of TDS certificates altogether. If only the income tax department provides the return forms early in April itself, it would hasten the process of filing tax returns well before the due date and avoid last minute rush as well. Besides this will help taxpayers, especially senior citizens, who wish to complete the work of filing tax returns early in April itself, so that they can leave on long summer vacation to be with their children who may be away in India or abroad.
A little bit of empathy and understanding would go a long way in making life easy for the tax payers, who are, in fact, partners in the nation building activity of the government.
(The author is a financial analyst and writes for Moneylife under a pen name ‘Gurpur