Is My Company Wrongly Deducting TDS from Salaries Below 2.5 LPA? Seeking Legal Advice

Hi, this is Sandeep. I am working as a Junior HR and recently joined the company, which is Chinese Inc.

Query about salary deductions

My query is: the company is deducting some amount of salary in the name of Tax/TDS, as they claim. As per my knowledge, if the salary package is more than 250,000/- per annum, then only the employee is eligible for TDS deduction. However, in my current company, they are deducting 10% Tax/TDS from those whose salary is below 2.5 PA, even though the company does not have PAN/TAN numbers, incorporation certificate number (they have applied for it), Shop Act License, etc. Why is the company misleading all the employees, and why is my HR manager also involved in this? Can somebody help me understand all these things? If this is incorrect, what is the process to take legal action against my company?

Thanks and Regards,
Sandeep

Tax Deduction and Compliance

If tax is being deducted, it must be paid to the Income Tax Department. Any employee can check their Form 26AS on the income tax site to see how much tax is deducted and how much is shown in Form 26AS.

Addressing Non-compliance

If suitable answers are not forthcoming about tax being deducted but not paid to the government, you can openly question the management. There is no future in such dishonest companies. Take the matter forcefully with management and move on. Where required, keep the IT department informed in writing about this fraud being done to employees as well as the government.

Thank you for your reply.

Further, if the salary is below 2.5 lakh PA, is tax applicable? Only professional tax is applicable as per my knowledge, but these guys are deducting 10% tax. What is that?

Pawar,

TDS Rate on Salary:
Any employer has the authority to deduct tax at the source while making the actual payment to the employee. Employers deduct tax from salaries only at the time of payment. TDS is deducted if the total income of the employee is taxable. TDS will not be deducted if your total income is Rs. 2,50,000. This amount is applicable for men and women below the age of 60 years. Normally, the TDS deduction rate on salary ranges from 10% to 30%.

Hope this makes things clear.

Dear Sandeep,

Is your company showing you as an employee on the salary register? Are they deducting your EPF? I think they may be treating you as a freelancer or an outsourced agency because they are deducting 10 percent tax. It might be true that you can request them to issue a TDS certificate in the form of 16 or 16A, where they clearly mention the type of services they are taking from you.

In this case, it's important to clarify your employment status with the company and ensure that the necessary documentation, such as the TDS certificate, is provided to you accordingly.

Kind regards

Why should there be confusion regarding the status of an employee? Even if 10% is deducted, it should reflect in the form 26AS of the employee. There have been cases where TDS is deducted but not paid to the government. A recent case took place in Bangalore. An employee needs to verify his form 26AS and address it with the company first in case the deducted amounts are not reflected in 26AS.

Dear Sandip,

It is really a matter of concern when the company has not obtained PAN and TAN but is deducting TDS from the salary of the employee. You can verify your Tax Credit Statement (Form 26AS) online.

As an employee, you have the right to ask your employer to provide Form 16 for all such deductions made under the heads of TDS.

Employers are supposed to give you Form 16 for any deductions under income tax such as TDS, etc. Even if the deductions are nil, the employer must issue Form 16. Additionally, as advised, check 26AS to know your deductions, if any. A company must have a TAN number for TDS deductions.

Querist needs to go through this link https://cleartax.in/s/what-is-form-16

Dear Bijoy, If no deduction is made, Form 16 may not be issued by the employer.