Employees in Chennai-based companies are facing a financial problem due to unpaid salaries. This has resulted in confusion regarding income tax deductions and whether employees can claim the paid tax.
According to Prabhakar K S, founder and chief executive officer of tax advisory firm Shree Tax Chambers, income tax on salary is applicable whether it is due or received. This has created a conflict in the timing of tax deductions for employees who have not been paid their salaries.
The issue arises from the fact that employers are required to deduct taxes at the time of payment, but the amount should only be deducted based on the actual salary received, not the accrued amount. In the case of unpaid salaries, TDS should be calculated based on the tax rates prevailing in the Assessment year.
Historically, this issue has been a challenge for employees and employers alike. The confusion surrounding the timing and amount of tax deductions has led to uncertainty and financial strain for many individuals.
Unfortunately, for employees who are already in the tax bracket and have availed of all deductions, it is unlikely that they will receive a tax refund.
This ongoing issue highlights the need for clarity and consistency in tax laws and regulations, as well as the importance of timely and accurate salary payments for employees. It is essential for both employees and employers to stay informed and seek professional guidance to navigate these complex tax matters.
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