Can We Legally Hold an Ex-Employee's Salary for TDS? Seeking Advice on a Tax Dispute

One of our employees resigned on 6th July 2011. Our CA suggested holding her TDS amount for the year 2011-12 as she will provide us with the investment documents at the end of the financial year. Now she disagrees with us and is asking to be paid her salary. She is questioning how she became eligible for the tax as she worked for three months with us in the financial year 2011-12. She argues that we cannot hold her salary as her current company will take care of the TDS for this year.

Query: Can We Hold Her Salary?

My query is, can we hold her salary? Why?

Please help me solve this issue.

Thanks in advance.

In my view, if the total amount of salary due (till the date she worked with your company) exceeds Rs. 190,000, your company will be under an obligation to deduct TDS and pay it to the Income Tax Department. At the year-end, your company will have to issue a TDS Certificate to that employee so that she can claim the TDS in her return. If you have done so and the employee is still asking for the payment of the TDS amount, you can tell her that the amount has been paid to the Income Tax Department, and she will be issued a certificate in that respect which she can claim in her return.

If her salary for the period from 1st April '11 to 6th July '11 is less than Rs. 190,000, you cannot hold her salary for the reason of the deduction of TDS.

I hope I have understood and answered your query satisfactorily.

Regards,
CA. Ankit Tulsyan

Thanks for your reply. As you mentioned, at the financial year ending, our company may have a problem if we don't deduct the TDS now. The salary doesn't exceed Rs. 190,000 for the said period, even though our CA mentioned that the calculations are made on the basis of the whole year, so there must be a deduction for the three months. The CA has advised her that she can file the returns, but she is not ready to agree on the point that we can deduct her TDS. We have paid her the amount excluding TDS and asked her to submit the investment details; then only we can give you the remaining amount. However, she doesn't want partial payment and is arguing on the same issue.

TDS Deduction and Refund Process

Once TDS is deducted, she has to claim the refund through returns filing. Deducted TDS cannot be paid by the employer to the employee.

Regards,
Pon