Myth vs Fact: Salary TDS Means No Further Tax Liability

Myth vs Fact: Salary TDS Means No Further Tax Liability

Myth: Employer deducts TDS every month. Form 16 shows tax deducted. Employee believes tax is settled.

This belief is common. This belief is wrong.

Fact: TDS is only a provisional deduction. Final tax liability depends on total income and disclosures in the return.

Neha earns Rs 8,50,000 salary. Employer deducts TDS of Rs 40,000 after standard deduction. Neha also has freelance income of Rs 1,20,000 not reported to employer.

Revised income becomes Rs 9,70,000.

Tax liability increases. TDS stays same.

Gap leads to tax payable, interest under section 234B and 234C, and possible notice.

Impact of not filing return and not paying tax:

• Interest under section 234A for delay in filing
• Interest under section 234B and 234C for short payment
• Late fee under section 234F up to Rs 5,000
• Loss of refund if excess TDS exists
• Difficulty in loan processing due to missing ITR
• Notice for income mismatch based on AIS and TIS data
• Penalty in case of under reporting of income

TDS gives a starting point. Final responsibility stays with the taxpayer.

Key action points:

• Check Form 26AS and AIS before filing
• Report all income sources including interest and side income
• Recalculate tax liability before due date
• Pay self-assessment tax if TDS falls short
• File return on time even if no refund arises

A simple check avoids interest, penalties, and notices.

What has been observed in practice. Most salary cases with additional income face shortfall. Early computation solves the issue.

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