What to do if My Employer Does Not Pay TDS?

There might be occasion where you receive your salary every month but you find out at the end of the year that your employer hasn’t been paying your income tax as TDS at all. Is paying tax on your earnings your responsibility and yours alone? Are you liable to be prosecuted? What can you do if such a situation arises?

TDS or tax deducted at source, as an idea, was introduced with the goal of making meeting working capital requirements of the government as well as giving the taxpayer the flexibility to break down her liabilities into bite-sized pieces. It also serves the need to shift the liability of payment to the person who is responsible for disbursing the source of income in the first place.

Tax at source is paid not only by employers but also by insurance companies, fund managers, brokers and even those living in rented accommodation paying Rupees 50,000 or more as rent every month. In the last case, the owner of the rented property is responsible for depositing the toll to the IT department.

It is compulsory by law for all employers to pay this amount at the point of transfer, usually by using Challan 281, at designated banks and branches. Nowadays, you can also pay TDS online at the official CBDT portal. This applies to all corporate assessees as well as those non-company entities (businesses or professionals) whose gross income in the previous year was less than Rupees 1 crore in the case of commercial firms or Rupees 50 lakh in the case of skilled or unskilled professionals.

The IT department assumes that the employer represents the taxpayer for purposes of tax at source and holds him responsible for the latter’s taxes. Very often, the process of filling forms and identifying accounting methods is tedious and complicated depending upon how big your firm is. In such instances it is recommended that you get in touch with a seasoned tax expert to file payments for you.

Should your employer fail to pay your taxes make sure you have the necessary salary slips and proofs of deduction and get in touch with your Assessing Officer as soon as you can.

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How to calculate Income Tax on Salary

When learning to calculate the tax on earnings, one should always start with the basics such as different tax-brackets, permitted relaxation, e filing process, getting refund, etc.

The investments you make actually make a significant difference when computing the final amount. So, one should also learn about the common types of deductions in taxation.

Do check our income tax calculator which will automatically compute the final figure after reducing the applicable deductions when you submit the necessary data in the form shown to you.

You can find more information on such interesting topics here.

It is a popular myth that different rates are applied directly to the total amount. This is not the case though.

For example, if you are less than 60 years old and earning Rs 14 lakh annually, then you won’t be charged 30%, i.e. Rs 420000, directly on your total salary.

However, this will be calculated as below:

First, if you are eligible for any deductions, your taxable earnings will be evaluated.

Let’s say, your taxable amount comes out to be Rs 13,00,000.

Now, total value will arrive in stages.

For the amount between Rs 250000 and Rs 500000, i.e. Rs 250000, you will be charged at 5%. This comes out to be Rs 12500.

For the amount between Rs 500000 and Rs 1000000, i.e. Rs 500000, you will be charged at 20%. This comes out to be Rs 100000.

For the amount between Rs 1000000 and Rs 1300000, i.e. Rs 300000, you will be charged at 30%. And, this comes out to be Rs 90000.

So, the total value charged     = Rs 12500 + 100000 + 90000

                                    = Rs 2,02,500

In the same way, you can work with the other slabs as well.

You don’t have to be a math genius to do your taxes! You can easily hire an expert. We, at AllIndiaITR, guarantee you the best rates in the market for highly professional financial services like income tax efiling, income tax return, NRI plan, income tax refund, etc.

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Understanding Flat Tax

The way the people of a country are taxed by its government plays a significant role in the growth of the country’s economy. Throughout the world, employees, entrepreneurs, and corporations are taxed mainly in three ways, namely progressive taxes, regressive taxes, and flat taxes.

When people are levied progressively, the rich are charged more than the poor. The rates increase as income tax brackets rise, thus impacting the high-salary earners more than the low-salary earners.

On the contrary, regressive taxes affect taxpayers with lower salaries more than the ones with higher salaries. Here, the tax-burden is not imposed directly on a person’s ability to pay, but the government charges it as a percentage of the asset that the taxpayer buys. For instance, sales charge on purchasing an item is computed as a percentage of the item bought, which is the same for all.

You can find more information on topics like e filing, refund status, income tax calculator, income tax refund, etc. on our blog.

Flat Tax

In flat taxation, there exists a fixed marginal rate. A marginal tax rate is the rate one has to pay for one extra unit of salary.

This is also known as Proportional Tax. It’s a proportional system since it levies all taxpayers at the same rate, regardless of their salary-levels.

However, flat taxation can behave like progressive taxation (a marginally flat taxation) also whenever applicable deductions are included. This excludes certain types of incomes from being recognized as taxable salary.

This can also become a regressive taxation method when the earnings are taxed at a flat rate until a specified cap amount is reached.

Laffer Curve Theory

The Laffer Curve theory is based on the principle that marginal tax rates will impact the motivation as income rises. This means that higher marginal rates will leave people with less motivation to earn more.

That is why, on a larger scale, taxable income decreases as a function of the marginal rate, making the net government taxation revenues decrease after a particular point. 

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Filing Income Tax Returns in the Year 2018

If you think you can get away with not filing income tax returns this financial year, think again. The government is serious this time.

Filing income tax returns no longer involves pen and paper and a calculator. So you may have to change old jokes describing your duties to society at the next friendly get together.

It is mandatory for each resident Indian to e-file her taxes if she earns more than Rupees 2.5 lakh in a year. This rule is set in stone following a literal reading of Section 139 of the IT Act, 1961. Is there any chance of a leeway in terms of declaration of levies paid to the government? Not for the financial year 2017-18. Finance Minister Arun Jaitley had already announced earlier in the year that those unable to file their taxes by the due date would face stiff fines and penalties.

This threat has now been given teeth by the insertion of Section 234F to the existing statute that stipulates a penalty of Rupees 5000 on those declaring their taxes after the 31^st of July (or any other due date as specified by the authorities) but on or before the 31^st of December, 2018.

This toll could go up to Rupees 10,000 in case you do your returns after this date. There is the small consolation that your burden would not increase by Rupees 1000 if you earn less than 5 lakh in a year.

Apart from fees and fines you will also be charged interest on arrears starting from the date the window closed to the date the government receives your statement online.

The message is simple: Do not fail to declare your annual statements and do it online. Because it’s fast, easy and secure and charges next to nothing if you are an ordinary assessee.

There are, of course, several advantages to doing your filings on time.

·         Firstly, you become eligible for early refunds on excess payments to the government.

·         Secondly, you contribute to keeping CA assistance costs low by distributing demand along the full range of the allotted time for declaration.

·         You get a fuller chance to rectify mistakes in your declaration. You do not get charged interest for such failures.

This information is provided to you in the public interest courtesy of AllIndiaITR, a product of Corwhite Solutions Private Limited.

Taxes and Economy: Growth vs Development

Do you think that the economy is doing well if it has a reasonable level of GDP growth rate and tax collections? Think again.

From the point of view of economics, income tax rates have not been found to have a consistent correlation with GDP growth rates. However, basic microeconomic theory does suggest that increase in tax adds to the burden on price of goods and services. This burden falls unequally on both consumers and producers depending upon how responsive the demand for that particular good or service is in existing markets.

This happens because such a price increase is artificial and extraneous to market force analysis and results in a net contraction in demand. There is therefore a loss in revenue that could have been generated had buyers and sellers been free to determine the market price according to prevailing cost of inputs and the willingness of the consumer to pay for an extra unit of the product.

In short, tax increases are bad for everybody and should not be implemented unless there are compelling reasons to do so.

To further clarify the function of economic growth and fiscal policy it is necessary to clarify what is meant by the former and how it differs from economic development.

Economic Growth: The GDP or the Gross Domestic Product is a measure of the total income earned by all wage earners, business owners, holders of titles to property, speculators investing capital in commercial ventures and so on. Alternatively, it can also be computed as the monetary value of all goods and services produced in a country in one single financial year.

The quantity that is pertinent to the term sought to be defined is the rate of increase in GDP compared to the previous year expressed in percentage terms.

Economic Development: While the previous term assumes that increase in income growth, though unequally distributed, will trickle down to the lowest strata of society in the long run, the Human Development Index – a composite measure of education, life expectancy and per capita income measures changes in the condition of the human self as a result of economic action.

Neither of these are complete nor perfect indicators and we leave it to the gentle reader to decide the meaning of each term the next time you read the Annual Budget or do your income tax returns.

This information is provided to you in the public interest courtesy of AllIndiaITR, a product of Corwhite Solutions Private Limited.

The GST Council and Tax Reform

The 23^rd GST council meeting in November this year promised many tax reform agendas including reduction in tax returns. Find out how far expectations were met.

After many delays and hiccups, the long awaited reforms to the GST regime in India were finally announced and published in the official gazette. On the 10^th of November this year, the GST Council met for its 23^rd session and put in motion a bevy of changes to existing GST rates and tax slabs.

The highest tax bracket of 28% will no longer contain chewing gum or chocolates – white or brown, containing or not containing cocoa, malt extracts, meal preparations involving flour, groats, starch etc. and having a limited percentage of cocoa and so on. After the proposed modifications were formally given effect to on November the 15^th the number of items in 28% slab has reduced to a mere 50. It remains to be seen whether corresponding MRPs go down in proportion. Already, hotels and restaurants have refused a downward revision in service rates.

Firms and businesses not earning annual gross incomes of more than Rupees 1.5 crore can file their GSTR-1 tax return forms by December 31, 2017 and February 15, 2018 for the second and third quarters respectively. Those exceeding this ceiling may also file their GSTR-1 income returns by December 31 for the months of July to October.

Earlier in the year, the government had elaborated tax exemptions on incoming advances for supply of goods worth less than Rupees 1.5 crore. Now 1.5 crore would also be the ceiling for those who are eligible to opt for the GST composition scheme. Also, providers of services that make less than Rupees 5 lakh in a year can opt for the Composition Scheme. Thus cash flow and working capital deficits would be undercut.

The one-time tax return form, GSTR-3B can now be filed till the 20^th of December this year and would cease to be compulsory after March next year. Mandatory GST registration is no longer a compliance factor for services making less than Rupees 20, 00, 000 in a year.

Simplifications have also been made to the application modes for Advance rulings where transactions with a foreign entity is concerned.

Notwithstanding these welcome changes, GST implementation continues to face shortcomings and more on this will be discussed in an appropriate post.

Take advantage of the online revolution to get CA assistance from a CA to efile income tax returns via an online tax platform such as AllindiaITR, a product of Corwhite Solutions Private Limited.

How to Pay GST on Exchanging Currency

Ever thought about what your currency changer gets from converting your foreign currency? And what tax liability falls after the onset of the GST regime? Read on.

Your currency conversion would remain incomplete even if you know the exchange rate until you have factored in the applicable service tax. So, how do you compute the service tax, or the GST rate today, on exchanging currency?

The Reserve Bank of India permits Authorized Money Changers under Section 10 of the Foreign Exchange Management Act, 1999. This dealer agrees to exchange your currency at rates that are mutually agreeable. This is because the exchange rate keeps on changing every second of the day as currency is traded on an international exchange.

On the other hand, the RBI also, releases a daily reference rate for the Rupee vis-à-vis other currencies. The dealer hopes to earn her income by encashing the difference between buying and selling rates and may herself indulge in trading of securities involving foreign currency. For providing you with the service of currency conversion at a place of convenience, the dealer charges a commission on the exchange value. NRIs, tourists and businesses may find this service indispensable to their activities.

You may find it surprising but the tax on the dealer’s income is not calculated on the value of the commission she charges. Instead, the GST rate depends upon the value of currency being exchanged. This is a standard feature of GST valuation: ad-valorem tax rate or value based computation of tax liability.

There are two methods which a supplier of exchange currency may use to calculate service tax:

1.       The first method can be sub-divided into whether the RBI reference rate is available or not available:

a.       If RBI Reference rate is NOT available:
A tax rate of 1% of the total amount of Indian currency transacted, whether received or released.

b.      If RBI Reference rate IS available:
The difference in rate of exchange levied and the RBI reference rate multiplied by the total number of units converted.

2.       The second of the two methods makes it compulsory on the dealer to use the same method for self-assessment of tax throughout the year:

Currency converted (INR)	Taxable amount (%age of currency)
Upto 1 lakh	1% or min Rs 250
1 lakh to 10 lakh	0.5% + Rs 1000
More than 10 lakh	0.1% + Rs 5500

Take advantage of the online revolution to get CA assistance from a CA to efile income tax returns via an online tax platform such as AllindiaITR, a product of Corwhite Solutions Private Limited.