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TDS duty cannot be bypassed

I am a retired pensioner from the R. D. Department of the Government of Tamil Nadu becoming taxable in the year I receive arrears. At the time of payment, income-tax used to be deducted at source. But for a payment disbursed to me by a Government order dated November 2, 2005, I was required to deposit the income-tax liable to be deducted in advance and to send the original challan to the disbursing officer, so that the arrears will be disbursed. No explanation could convince the disbursing officer that this is not necessary. Kindly clarify.

It is true that TDS compliance is haphazard largely due to ignorance about the procedure. The practice pointed out by the reader is probably because of a wrong understanding by the disbursing officer that such direct payment by the payee would avoid responsibility of deducting tax on his part at the time of payment, filing necessary returns and issuing TDS certificates. The mode adopted does not absolve him of any of his statutory duties under the law. The Income-tax Department does issue annual circulars as regards the responsibilities of disbursing officers in charge of disbursement of salary, the last one being Circular No.9 of 2005 dated November 30, 2005 (2005) 279 ITR (St.) 60. The disbursing officers are well-advised to study and follow them if they are not to land themselves and their departmental heads in avoidable consequences of non-compliance with the law relating to tax deduction at source.

My wealth, apart from the house in which I live, consists of equity shares and bank deposits. I would like to be advised whether I would be liable for wealth-tax.

Levy of wealth tax is now limited only to a few specified assets (loosely described as non-productive assets), so that it is a poor shadow of its name "wealth tax". Section 2(ea) of the Wealth-tax Act lists the taxable assets for wealth tax. Land and building, subject to exception of one residential property, motor cars, yachts, boats and aircrafts, jewellery and other objects made of precious metals and cash in hand in excess of Rs.50,000 for individuals and HUFs are liable to tax. Agricultural land, other than urban land, is not liable. For a person, who does not own a house but only a plot, plot will not be taxable, if its size is less than 500 sq. metres. There is also a deduction from wealth tax for debts owed by the assessee on valuation date to the extent, that such debts are incurred in relation to these taxable assets. The aggregate value of the assets as reduced by the debts is taxable wealth, subject to basic exemption of Rs.15 lakhs. The excess, if any, is liable to tax at a flat rate of one per cent

In the light of the above position of law, there is no need for any apprehension on the part of the reader on the basis of his information.

To help my nephew who had to pay cash for an admission in a college, I had encashed a demand draft purchased by him in my name, through my bank account, so as to avoid the risk of carrying this amount in person, while on travel. I wonder what would be the tax consequences.

The reader may be expected to satisfy the authorities as to the identity of the purchaser of the draft and the source for the same. Presumably there will be no hassles on this account.

The only consequence which the reader is apprehensive about is the liability for banking cash transaction tax. The liability is at 0.1 per cent for every withdrawal exceeding Rs.25,000 in the case of individual or Hindu Undivided Families and Rs.1 lakh for others. Banking cash transaction tax is only on amount of withdrawal by a person from his account or on encashment of term deposits or deposits, so that there should be no liability on mere encashment of bank draft.

The responsibility for remission of this tax is not on the person who withdraws the cash, but on the scheduled bank including a co-operative bank, which has to deposit the tax on 15th day of the following month.

The bank, no doubt, is expected to collect the tax from the customer and deposit the same, but its failure does not recoil on the customer. The return has to be furnished by the bank and assessment also will be made on the bank. Under the circumstances, there is no responsibility for the reader in respect of this tax.

S. RAJARATNAM

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