Tax season is yet to really pick up pace in the country but tax scams are already hogging the headlines. Last month it was a refund fraud totalling Rs 5 crore in Bangalore. And now a TDS (tax deducted at source) scam worth Rs 3,200 crore has just been unearthed by the Income Tax department.
According to an investigation between April 2017 and March 2018, as many as 447 companies had failed to deposit the TDS collected from their respective employees with the taxman. Sources told The Times of India that these firms had instead diverted the money to further their own business interests, often as working capital. For instance, a leading politically-connected builder had thus diverted Rs 100 crore while an MNC providing IT solutions had failed to deposit Rs 11 crore. The list of offenders also includes movie production houses, infrastructure companies, start-ups as well as fly-by-night operators. The income tax department's TDS wing has reportedly started prosecution proceedings against the firms involved. Sources added that the department had initiated recovery actions by attaching bank accounts, besides movable and immovable assets, and in some cases warrants had also been issued.
For the record, TDS is a kind of advance tax that applies on payments like salaries, commissions etc. if they exceed prescribed threshold limits. The tax is deposited with the government quarterly and the onus lies with the deductor, i.e. the company or person that makes the payment after deducting TDS. Under the Income Tax Act, failure to pay TDS "shall be punishable with rigorous imprisonment, which shall not be less than 3 months but which may extend to 7 years" along with a fine.
However, sources in the IT department told India Today that "it is not a scam", just a very common verification survey done every year. "Quantum may vary year to year. This is just like an employer deducts TDS on salary but did not deposit on time." The next few days should bring more clarity to the matter.