From employees to employers: How salary tax compliance is quietly changing - expert explains

For years, income tax scrutiny around salary deductions has largely been an employee-level issue. If someone claimed an ineligible deduction or inflated an investment, the tax notice went straight to the individual. Employers were seen mainly as facilitators, processing salaries, deducting tax, and moving on. That comfort zone, however, is quietly disappearing.

Tax consultant and expert CA Nitin Kaushik says a major shift is underway in how the system views responsibility. “The lens has now moved from employees to employers,” he explains. “Tax authorities are increasingly reaching out to salary-disbursing entities and DDOs instead of individual taxpayers. This is not a small procedural change—it reflects a completely new mindset.”

Until recently, salary declarations worked largely on trust. Employees submitted investment details, payroll teams processed them, and tax was calculated. Proofs were often checked lightly—sometimes not at all. “Earlier, declarations were treated like good-faith statements,” Kaushik says. “You declared, the employer deducted tax, and life moved on. That era is fading fast.”

Today, salary processing is no longer viewed as a clerical function. It is becoming a control function. Employers are now expected not just to collect declarations, but to verify them. “The questions have changed,” Kaushik notes. “Were the documents genuine? Did the investment really happen? Was the claim even eligible? Silence or assumption is no longer neutral.”

Why does this matter so much? Because unchecked errors can quickly turn into systemic problems. “One wrong claim is small,” Kaushik says. “But when hundreds of inflated deductions slip through, the gap between declared income and actual tax becomes huge. From a tax perspective, that’s not an error anymore—it’s leakage.”

This is where the risk shifts up the chain. What used to be labelled as “employee non-compliance” is now being seen as “process weakness” at the organisational level. And process weakness brings a different kind of response. “It doesn’t invite a gentle query,” Kaushik warns. “It invites scrutiny.”

According to him, this change is part of a broader global trend. “Tax systems everywhere are moving closer to the source,” he says. “Salary is predictable. Data is structured. Controls are traceable. Naturally, the spotlight moves to where consistency should exist, the employer.”

For organisations, this is less about tax and more about governance. Strong verification systems reduce exposure, protect HR and finance teams, and build audit confidence. “Think of it as preventive finance, not paperwork,” Kaushik advises. “Good controls today save uncomfortable explanations tomorrow.”

He believes the solution does not lie in complex rules but in a simple shift in approach. “Move from ‘submit whatever you have’ to ‘submit what you can substantiate’,” he says. “That one mindset change reduces risk more than any policy update.”

At its core, Kaushik says, this is not about fear-- it is about preparedness. “This isn’t just compliance. It’s risk management wearing a tax label. And risk doesn’t show up where intentions are bad. It shows up where controls are weakest. If salary is the most stable income stream, its taxation can’t remain the most casual process anymore.”