Employer Skips TDS? You Still Owe ₹3.36L?

If your employer deducts TDS from your salary but never pays it to the government, you could get a huge tax demand. But a landmark ruling says you cannot be punished for your employer's default — here's what to do.

Here's what happened: Employers are legally required to deduct TDS from salary and deposit it with the Income Tax Department every month.. When an employer deducts but does not remit TDS, Form 26AS shows no credit — triggering a tax demand against the employee.. India's Income Tax Appellate Tribunal has ruled that employees cannot be held liable for TDS their employer deducted but failed to deposit..

What you should do: Download your Form 26AS and AIS from the Income Tax portal every quarter to verify your TDS credits are actually showing up.. If TDS is missing in Form 26AS, write formally to your employer demanding proof of TDS challan deposits before filing your ITR.. If you receive a tax demand notice despite TDS being deducted, respond citing Section 205 of the Income Tax Act and attach your salary slips as proof..

Section 205 of the Income Tax Act explicitly bars the government from recovering tax from an employee if TDS was already deducted at source — use this as your legal shield in any notice reply.