The Mumbai Income Tax Appellate Tribunal has held that a salaried employee cannot be denied TDS credit just because her employer deducted the tax but never deposited it with the government.
The employee had declared income of about Rs 18.4 lakh for FY 2018-19 and claimed Rs 3.9 lakh in TDS. But the tax department’s processing centre allowed only around Rs 79,000, because her employer’s default meant the balance never showed up in her Form 26AS. That left her staring at a demand of nearly Rs 3.4 lakh, on income from which tax had already been cut.
She had only ever received her net salary. On the strength of her salary slips, Form 16 and bank statements, the Tribunal ruled in her favour, condoned her delay in appealing (she had genuinely been chasing a correction for years), and directed the officer to verify her records and grant full credit.
The principle is settled law, not sympathy. Section 205 of the Income Tax Act bars the department from recovering tax from an employee once it has been deducted from her salary. The default is the employer’s problem, and the department must pursue the employer, not the employee.
Keep this in mind: Always retain your Form 16, salary slips and bank statements. If your Form 26AS or AIS ever shows less than what was actually deducted, those documents are what protect you.
