The Hindu Business Line : IT deduction procedure

Generally in the private sector, the organisation collects Proposed Investment Declaration forms filled out by the employees in June-October and accordingly deducts tax in advance from the salaries on a monthly basis. Then the final IT declaration forms are collected between January 15 and 20. Thus the employees have to invest for the current financial year two months before the actual year-end.

Those who are able to invest between April and January have their tax deducted and those whose excess tax is deducted have to wait till the filing of tax returns, though the appropriate investment is done, and then wait for the refund cheque from the IT department.

In the 21st Century, where administration is increasingly getting computerised, such a procedure seems obsolete. This can be avoided by implementing the following:

All organisations should clarify the taxation procedure based on income, and accordingly outline what investment amount should be made in the April-June period.

Depending on the income, employers should deduct a token amount of income tax from the salary. This deducted amount should be in the account of the organisation and not the Income-Tax department.

All tax-payers should be allowed to invest till March 5.

In February, the organisation should provide notice to its employees about submitting the final IT declaration form for the current financial.

According to total investment of the employees, the final income taxable amount should be deducted from the March salary. The excess amount that was deducted as a token should be refunded in the same month's salary.

This will smoothen the functioning of the taxation system between the employees, employers and the government. Income-tax will actually be deducted once a year. There will be no need to file tax returns. This will save a lot of documentation and all employees will get the 11-month period (April-February) to make investment.

Ashish Mhapankar

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