The Supreme Court on Friday dismissed a Public Interest Litigation (PIL) challenging the Tax Deducted at Source (TDS) framework, calling it “badly drafted” and advising the petitioner to approach the High Court instead.
A bench comprising Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar rejected the plea filed by advocate Ashwini Upadhyay, stating, “Sorry, we will not entertain. It is very badly drafted. You can move the High Court. Some judgments have upheld it. We will not entertain. Dismissed.”
The petitioner had sought to declare the TDS mechanism “manifestly arbitrary, irrational, and violative” of fundamental rights under Articles 14, 19, and 21 of the Constitution.
Petition Highlights Burdens of TDS
The plea argued that the TDS system places a disproportionate administrative burden on assessees, particularly those from economically weaker sections and small earners who lack the resources to navigate its complexities. It claimed the framework violates Article 14 by creating an unequal burden and Article 23 by imposing what it referred to as “forced labour” in the form of tax collection responsibilities on private citizens.
“The regulatory and procedural framework surrounding TDS is excessively technical, often requiring specialised legal and financial expertise, which most assessees lack. This unjustly shifts sovereign responsibilities to private citizens without adequate safeguards or compensation,” the petition stated.
Call for Reforms
The plea sought directions to the NITI Aayog to review the concerns raised and propose necessary reforms to the TDS system. Additionally, it urged the Law Commission to assess the legality of TDS and submit a report within three months.
The petition highlighted that while TDS ensures steady revenue for the government, it imposes significant compliance requirements on assessees, including:
– Determining applicable TDS rates
– Deducting taxes before payments or credits
– Depositing taxes within stipulated timeframes
– Issuing TDS certificates to deductees
– Filing returns and adhering to frequent legal amendments
Failures in compliance could result in penalties, further burdening individuals and businesses.
What is TDS?
Under the Income Tax Act, TDS requires payers to deduct tax at the time of payment for salaries, rents, commissions, contractual fees, and other taxable amounts. The deducted sum is then deposited with the government, adjusted against the payee’s tax liabilities.
Despite its importance in maintaining a steady flow of government revenue, the petitioner argued that the system disproportionately affects those without the means to manage its technical demands.
While dismissing the PIL, the apex court left open the option for the petitioner to present the case before the High Court for further consideration.
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