PIL in SC seeks to scrap TDS system
Dec 27, 2024
New Delhi [India], December 27 : A PIL has been filed in the Supreme Court seeking to declare that the Tax Deducted at Source (TDS) system is "manifestly arbitrary, irrational and violative of various fundamental rights".
The petition filed by advocate Ashwini Kumar Upadhyay contended that the TDS system disproportionately burdens the assessee with significant administrative expenses.
"Declare the TDS system manifestly arbitrary, irrational and against Articles 14 (right to equality), 19 (right to practice profession) and 21 (right to life and personal liberty) of the Constitution, hence void and inoperative," the plea stated.
The petition made the Centre, Ministry of Law and Justice, Law Commission, and NITI Aayog as parties in the case.
The plea urged the apex court to direct the NITI Ayog to consider the contentions raised in the plea and suggest necessary changes in the TDS system.
Law Commission should examine the legality of the TDS system and prepare a report within three months, it sought.
The petition said the system violated Article 14 by disproportionately burdening economically weaker sections and small earners who lack the capacity to navigate its technical requirements.
The plea while referring to Article 23 said the imposition of tax collection duties on private citizens amounted to forced labour.
"The regulatory and procedural framework surrounding TDS is excessively technical, often requiring specialised legal and financial expertise, which most assessees lack. The result is an unjust shifting of sovereign responsibilities from the government to private citizens without adequate compensation, resources, or legal safeguards," it said.
While TDS ensures steady revenue inflow for the government, it imposes substantial administrative and financial obligations on the assessees, the advocate said.
These obligations include determining applicable TDS rates across various provisions, deducting taxes before payments or credits, depositing taxes with the government treasury within specified timeframes, issuing TDS certificates to deductees, filing returns and ensuring compliance with frequent legal amendments and defending against assessments, penalties in cases of inadvertent non-compliance, added the plea.
The TDS framework under the Income Tax Act mandates the deduction of tax at the time of payment by the payer and its deposit with the income tax department. These payments include salaries, contractual fees, rents, commissions and other taxable sums. The deducted amount is adjusted against the payee's tax liability.
