INCOME TAX

INSTRUCTION NO. 5107/1992

 Dated: December 14, 1992

Section(s) Referred: 192 ,193 ,194 ,195 ,196 ,197 ,198 ,199 ,200 ,201 ,202 ,203 ,204 ,205 ,206 ,206A ,206B ,206C

Statute: Income - Tax Act, 1961

I would like to draw your attention to a very important area of income tax collection - TDS - where a little assistance from you can significantly improve the results through better compliance with the legal provisions by the offices under the State Government.

Under the scheme of TDS, a person, at the time of making certain types of payments, is required to deduct income-tax at source and pay the sum deducted to the credit of the Central Government by the prescribed date. The most common examples of TDS in Government Departments and Undertakings are TDS from salaries and payment to contractors. Other examples are TDS from payments of interest and winnings from lottery. A few years ago a new provision was added under which tax is required to be collected at source at the time of sale of alcoholic liquor and forest produce. The provisions regarding tax deduction/collection at source are contained in Chapter XVII B and BB of the I.T. Act. Non-compliance with these provisions attracts levy of interest and penalty and also prosecution of the defaulters. The CBDT also issues circulars explaining the duties and responsibilities of the tax deductors, which are regularly sent to the State Governments.

It has, however, been noticed that some State Government Departments and Undertakings do not properly implement the provisions of TDS which results in substantial loss of revenue. The lapses range from total failure to deduct tax to short deduction of tax due to incorrect calculation. Sometimes tax is not deducted from interest paid on compensation for land acquisition. While the Income-tax Department will continue its efforts to enforce the TDS provisions strictly and interact with the respective disbursing authorities, it will be extremely useful if a message goes down from you underscoring the importance of this work.

[Chairman's, CBDT DO No. 385/46/92-IT(3)