M. Raghuram

Misclassification of employees is rampant among many firms

Tax deducted used for business turnover and not deposited immediately

BANGALORE: The Income Tax Department will take up a drive to extend the TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) network with an explicit objective of bringing all employers to give full effect to TDS and TCS in their respective organisations.

The department was studying the possibility of implementing a strict time schedule for transferring the tax collected through TDS and TCS into government accounts.

Sources in the department told The Hindu that these steps had been necessitated because of a widespread non-remittance of tax into government accounts. The long list of defaulters on TDS and TCS includes State government organisations, including corporations and boards, hospitals, medical colleges, firms and companies, public sector undertakings and a few cooperative organisations, business houses and even airline companies. It was said that many companies had begun the practice of “misclassification” of their employees resulting in lower tax deduction at source.

The payments are “disguised” into perks and privileges which attracted only 10 per cent Income Tax instead of 30 per cent. The companies classify their highly paid employees as “consultants” and the payments they receive are not salaries but classified as “fees”, the sources added.

Chief Commissioner of Income Tax-I Bangalore Pramod Kumar told The Hindu that the decision to strengthen the TDS and TCS had stemmed from the fact that many establishments in the State used the tax deducted at source as their own money and used it for business turnover. Actually, the money should be remitted to the government account within a reasonable time limit. It was government property and nobody was authorised to use that money in any way.

He said even while the TDS provisions were in place for many years, there were assessees who were not aware of the various provisions related to TDS and TCS. Many companies had not yet obtained the Tax Deduction Account Number (TAN) although TAN was mandatory to comply with the TDS provisions.

The department, Mr. Pramod Kumar said, deemed it necessary that quoting the Permanent Account Number (PAN) was necessary in more than 90 per cent of TDS operations and every assessee must have PAN. It enabled the department to track their tax deduction from time to time.