No demand notice if TDS not deposited by deductor

Income Tax officials sometimes penalize you even if you correctly comply the provisions.

You being a taxpayer whose tax has been deducted at source but not deposited to the Governments account by the deductor and you receive a demand notice from the Department.

This is the common issue of the taxpayer that when the deductor has deducted the tax from their income then why they receive the notice. Deductor being the defaulter escape from the scene and the innocent taxpayer gets tangled in the web of the Department.

To the relief of the deductee, The Central Board of Direct Taxes had issued directions to the field offices that taxpayers whose tax has been deducted at source but not deposited to the Governments account by the deductor, will not be asked to pay the demand to the extent tax has been deducted from his income. A letter to this effect was issued on 01.06.2015.

Through this letter an embargo had been put on direct demand against the assessees in cases where the tax demand is on account of tax-credit mismatch due to non-payment of TDS to the Government account by the deductor.

Even after the direction issued by the CBDT, there were cases noticed till date where notices were issued to the deductee where deductor has not deposited the tax to the Governments account. Instances have come to the notice of the Board that these directions are not being strictly followed in field offices. Taxpayers were unnecessarily harassed by this act of the department.

To discourage this, an Office Memorandum has therefore been issued on 11.03.2016 reiterating the contents of the letter. It has been re­emphasized that the assessing officers shall not enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor.

Through Office Memorandum the Income-Tax Department today asked field offices to refrain from raising tax demand against assessees whose TDS has already been deducted but not deposited to the Governments account.

Download the Office Memorandum.

Source: Mr. Alok Patnia, founder of

Leave a Reply

Your email address will not be published. Required fields are marked *