{"id":8658,"date":"2025-02-24T19:14:39","date_gmt":"2025-02-24T19:14:39","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=8658"},"modified":"2026-02-15T19:31:17","modified_gmt":"2026-02-15T19:31:17","slug":"who-is-liable-if-tds-is-deducted-but-not-paid-by-employer","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/","title":{"rendered":"Who is Liable If TDS Is Deducted But Not Paid by Employer?"},"content":{"rendered":"<h2 data-start=\"200\" data-end=\"285\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-6029\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122.jpg\" alt=\"TDS\" width=\"1200\" height=\"752\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122.jpg 1200w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122-300x188.jpg 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122-1024x642.jpg 1024w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122-768x481.jpg 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/07\/TDS-122-800x501.jpg 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69dd49e0cb1c9\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69dd49e0cb1c9\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Can_Employees_Be_Made_Liable_If_TDS_Is_Deducted_But_Not_Paid_by_the_Employer\" title=\"Can Employees Be Made Liable If TDS Is Deducted But Not Paid by the Employer?\">Can Employees Be Made Liable If TDS Is Deducted But Not Paid by the Employer?<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Background_Legal_Framework\" title=\"Background &amp; Legal Framework\u00a0\">Background &amp; Legal Framework\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Section_205_Bar_on_Recovery_from_Employees\" title=\"Section 205: Bar on Recovery from Employees\">Section 205: Bar on Recovery from Employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#CBDT_Instructions_Clarifying_No_Recovery_from_Employees\" title=\"CBDT Instructions Clarifying No Recovery from Employees\">CBDT Instructions Clarifying No Recovery from Employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Key_High_Court_Rulings_Supporting_Employees\" title=\"Key High Court Rulings Supporting Employees\">Key High Court Rulings Supporting Employees<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Malay_Kar_v_Union_of_India_Orissa_High_Court_2024\" title=\"Malay Kar v. Union of India (Orissa High Court) [2024]: \">Malay Kar v. Union of India (Orissa High Court) [2024]: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Employee_Protection_Against_Employer_Default\" title=\"Employee Protection Against Employer Default\">Employee Protection Against Employer Default<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Penalties_for_Employers_Who_Fail_to_Deduct_or_Deposit_TDS\" title=\"Penalties for Employers Who Fail to Deduct or Deposit TDS\">Penalties for Employers Who Fail to Deduct or Deposit TDS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#Penalties_for_Late_Filing_of_TDS_Returns\" title=\"Penalties for Late Filing of TDS Returns\">Penalties for Late Filing of TDS Returns<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/who-is-liable-if-tds-is-deducted-but-not-paid-by-employer\/#About_IFCCL\" title=\"About IFCCL\">About IFCCL<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 data-start=\"200\" data-end=\"285\"><span class=\"ez-toc-section\" id=\"Can_Employees_Be_Made_Liable_If_TDS_Is_Deducted_But_Not_Paid_by_the_Employer\"><\/span><span style=\"color: #000080;\"><strong data-start=\"202\" data-end=\"283\">Can Employees Be Made Liable<a href=\"https:\/\/carajput.com\/blog\/how-to-file-tds-return-online\/\"> If TDS Is Deducted<\/a> But Not Paid by the Employer?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 data-start=\"287\" data-end=\"328\"><span class=\"ez-toc-section\" id=\"Background_Legal_Framework\"><\/span><span style=\"color: #000080;\"><strong data-start=\"291\" data-end=\"326\">Background &amp; Legal Framework\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 199 of the Income Tax Act:\u00a0<a href=\"https:\/\/carajput.com\/blog\/how-to-file-tds-return-online\/\">TDS deducted by the employer<\/a> and paid to the government is treated as tax paid on behalf of the employee. The CBDT is authorized to issue rules regarding TDS credit to taxpayers.\u00a0 However, if the employer deducts TDS but fails to deposit it, does the liability shift to the employee?<\/p>\n<p>If an employer deducts TDS but does not deposit it, the amount will not appear in Form 26AS under the employee\u2019s PAN.<\/p>\n<p>Consequences for the employee: Then the employee cannot claim TDS credit while filing their Income Tax Return (ITR). also a mismatch notice from the Income Tax Department for TDS claimed but not reflected in Form 26AS. Moreover, employees might be caught in a dispute between the employer and tax authorities.<\/p>\n<h3 data-start=\"695\" data-end=\"751\"><span class=\"ez-toc-section\" id=\"Section_205_Bar_on_Recovery_from_Employees\"><\/span><span style=\"color: #000080;\"><strong data-start=\"699\" data-end=\"749\">Section 205: Bar on Recovery from Employees<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p data-start=\"695\" data-end=\"751\">Section 205 of the Income Tax Act explicitly bars the income tax department from recovering unpaid TDS from an employee if it was already deducted by the employer.\u00a0 The employer remains responsible for depositing TDS, and the employee cannot be penalized for non-payment by the employer.<\/p>\n<h3 data-start=\"1069\" data-end=\"1137\"><span class=\"ez-toc-section\" id=\"CBDT_Instructions_Clarifying_No_Recovery_from_Employees\"><\/span><span style=\"color: #000080;\"><strong data-start=\"1073\" data-end=\"1135\">CBDT Instructions Clarifying No Recovery from Employees<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The CBDT issued two key instructions (2015 &amp; 2016) confirming that:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul data-start=\"1216\" data-end=\"1470\">\n<li data-start=\"1216\" data-end=\"1342\">When TDS has been deducted but not deposited, the income tax department cannot enforce recovery from the employee.<\/li>\n<li data-start=\"1345\" data-end=\"1470\">Demand notices cannot be issued against employees due to tax credit mismatches caused by employer non-compliance.<\/li>\n<li data-start=\"1345\" data-end=\"1470\">\n<p data-start=\"968\" data-end=\"1083\">To prevent employers from defaulting on TDS deposits, the CBDT has imposed stricter monitoring and penalties, i.e TDS range officers must closely track compliance within their jurisdictions. If there is a TDS mismatch due to the employer\u2019s failure, the taxpayer is no longer held responsible (CBDT Clarification).<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3 data-start=\"1477\" data-end=\"1533\"><span class=\"ez-toc-section\" id=\"Key_High_Court_Rulings_Supporting_Employees\"><\/span><span style=\"color: #000080;\"><strong data-start=\"1481\" data-end=\"1531\">Key High Court Rulings Supporting Employees<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p data-start=\"1535\" data-end=\"1608\">Satwant Singh Sanghera (Delhi High Court) Ruling: Employees are entitled to TDS credit, even if the employer fails to deposit the deducted tax. The employee\u2019s tax liability cannot be reopened due to employer default.<\/p>\n<h3 data-start=\"1821\" data-end=\"1905\"><span class=\"ez-toc-section\" id=\"Malay_Kar_v_Union_of_India_Orissa_High_Court_2024\"><\/span><span style=\"color: #000080;\"><strong data-start=\"1826\" data-end=\"1903\">Malay Kar v. Union of India (Orissa High Court) [2024]: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p data-start=\"1821\" data-end=\"1905\"><span style=\"color: #000080;\">The employer<\/span><span style=\"font-size: 16px;\">\u00a0deducted TDS but did <\/span>not deposit<span style=\"font-size: 16px;\"> it with the government. <\/span><span style=\"font-size: 16px;\">The employee <\/span>must be given TDS credit<span style=\"font-size: 16px;\">, and the tax <\/span>cannot be recovered from them<span style=\"font-size: 16px;\">. <\/span><span style=\"font-size: 16px;\">The <\/span>legal obligation to deposit TDS lies with the employer<span style=\"font-size: 16px;\">, not the employee.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Employee_Protection_Against_Employer_Default\"><\/span><span style=\"color: #000080;\"><strong data-start=\"2208\" data-end=\"2271\">Employee Protection Against Employer Default<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 205 of the Income Tax Act, CBDT circulars, and High Court rulings reinforce that: If an employer deducts TDS but fails to deposit it, the employee is not liable for recovery. The income tax department cannot demand payment from the employee for unpaid TDS. The department must take action against the employer for non-payment.<\/p>\n<h3 data-start=\"1597\" data-end=\"1667\"><span class=\"ez-toc-section\" id=\"Penalties_for_Employers_Who_Fail_to_Deduct_or_Deposit_TDS\"><\/span><span style=\"color: #000080;\"><strong data-start=\"1601\" data-end=\"1665\">Penalties for Employers Who Fail to Deduct or Deposit TDS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table data-start=\"1669\" data-end=\"2104\">\n<thead data-start=\"1669\" data-end=\"1778\">\n<tr data-start=\"1669\" data-end=\"1778\">\n<th data-start=\"1669\" data-end=\"1697\">Default under Section<\/th>\n<th data-start=\"1697\" data-end=\"1721\">Nature of Default<\/th>\n<th data-start=\"1721\" data-end=\"1744\">Interest Charged<\/th>\n<th data-start=\"1744\" data-end=\"1778\">Period of Interest Payment<\/th>\n<\/tr>\n<\/thead>\n<tbody data-start=\"1885\" data-end=\"2104\">\n<tr data-start=\"1885\" data-end=\"1988\">\n<td>201A<\/td>\n<td>Non-deduction of TDS<\/td>\n<td>1% per month<\/td>\n<td>From due date of deduction to actual deduction<\/td>\n<\/tr>\n<tr data-start=\"1989\" data-end=\"2104\">\n<td>201A<\/td>\n<td>Non-payment of TDS (after deduction)<\/td>\n<td>1.5% per month<\/td>\n<td>From date of deduction to actual payment<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul data-start=\"2106\" data-end=\"2251\">\n<li data-start=\"2106\" data-end=\"2162\">Interest must be paid before filing TDS returns.<\/li>\n<li data-start=\"2163\" data-end=\"2251\">The interest on late TDS deposits is not allowed as an expense under income tax laws.<\/li>\n<\/ul>\n<h3 data-start=\"2258\" data-end=\"2311\"><span class=\"ez-toc-section\" id=\"Penalties_for_Late_Filing_of_TDS_Returns\"><\/span><span style=\"color: #000080;\"><strong data-start=\"2262\" data-end=\"2309\">Penalties for Late Filing of <a href=\"https:\/\/www.caindelhiindia.com\/service\/tds-return\">TDS Returns<\/a><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table data-start=\"2313\" data-end=\"2612\">\n<thead data-start=\"2313\" data-end=\"2359\">\n<tr data-start=\"2313\" data-end=\"2359\">\n<th data-start=\"2313\" data-end=\"2327\">Section<\/th>\n<th data-start=\"2327\" data-end=\"2341\">Penalty<\/th>\n<th data-start=\"2341\" data-end=\"2359\">Conditions<\/th>\n<\/tr>\n<\/thead>\n<tbody data-start=\"2402\" data-end=\"2612\">\n<tr data-start=\"2402\" data-end=\"2490\">\n<td>234E<\/td>\n<td>\u20b9200 per day<\/td>\n<td>Until TDS return is filed (not exceeding total TDS amount)<\/td>\n<\/tr>\n<tr data-start=\"2491\" data-end=\"2612\">\n<td>271H<\/td>\n<td>\u20b910,000 to \u20b91,00,000<\/td>\n<td>If incorrect TDS details are filed or returns are not submitted within the due date<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p data-start=\"2614\" data-end=\"2655\"><span style=\"color: #000080;\"><strong>No penalty under Section 271H if: <\/strong><\/span><\/p>\n<p data-start=\"2614\" data-end=\"2655\">The TDS is paid to the government. Late fees &amp; interest are cleared. <a href=\"https:\/\/www.caindelhiindia.com\/service\/tds-return\">TDS return is filed<\/a> within one year of the due date.<\/p>\n<p data-start=\"3204\" data-end=\"3236\"><span style=\"color: #000080;\"><strong data-start=\"3206\" data-end=\"3234\">If TDS is not reflected\u00a0<\/strong><\/span><\/p>\n<p>Employees should regularly check Form 26AS to confirm that the deducted TDS is correctly deposited. Taxpayers must keep evidence (salary slips, bank statements, and employer communication). Also, they must raise concerns with the employer before taking legal action. Moreover, file a written complaint with the AO if the employer does not rectify the issue. and contact the employer immediately. Request a correction if deposited to the wrong PAN, and if unresolved, file a complaint with the tax authorities.<\/p>\n<ul>\n<li data-start=\"3437\" data-end=\"3528\">Employees are protected under Section 205 if TDS is deducted but not deposited.<\/li>\n<li data-start=\"3529\" data-end=\"3618\">The employers face strict penalties, including interest and fines for non-compliance.<\/li>\n<li data-start=\"3619\" data-end=\"3693\">Regularly checking Form 26AS can prevent future tax complications.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"About_IFCCL\"><\/span><span style=\"color: #000080;\"><strong>About IFCCL<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div>\n<p>IFCCL provides end\u2011to\u2011end TDS filing services, ensuring accurate deductions, timely submissions, and full adherence to the TDS rules for 2026 and evolving TDS rules and deadlines. As the best tax consultant in Delhi, IFCCL supports businesses with seamless TDS return filing, reducing the risk of penalties and compliance gaps. Our expert team also offers comprehensive business tax consultancy, guiding organisations through complex tax structures, optimising liabilities, and enhancing regulatory compliance.<\/p>\n<p>Backed by strong expertise in tax compliance services, IFCCL manages detailed tax assessment handling and provides reliable tax audit support, ensuring that every financial record meets statutory standards. Alongside tax services, IFCCL delivers precise accounting &amp; bookkeeping and efficient payroll services, helping businesses maintain clean financials, timely employee payouts, and smooth operational workflows.<\/p>\n<p>With IFCCL as your compliance and finance partner, businesses gain structured, dependable, and future\u2011ready support across all taxation and accounting functions. Contact us at 9555 555 480 or Singh@carajput.com\/singh@caindelhindia.com<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Can Employees Be Made Liable If TDS Is Deducted But Not Paid by the Employer? Background &amp; Legal Framework\u00a0 Section 199 of the Income Tax Act:\u00a0TDS deducted by the employer and paid to the government is treated as tax paid on behalf of the employee. The CBDT is authorized to issue rules regarding TDS credit &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[100],"tags":[728],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8658"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=8658"}],"version-history":[{"count":5,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8658\/revisions"}],"predecessor-version":[{"id":10146,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/8658\/revisions\/10146"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=8658"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=8658"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=8658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}