The Income Tax Department is planning to take action against those who fail to deposit Tax Deducted at Source (TDS) or Tax Collected at Source (TCS), as well as those who provide incorrect details in their TDS returns. The Central Board of Direct Taxes (CBDT) has obtained a complete record of TDS and TCS transactions. Reports suggest that around 50,000 taxpayers have been shortlisted for scrutiny, many of whom deducted TDS but did not deposit the corresponding amount with the government.

As per Section 40(a)(ia) of the Income Tax Act, 1961, if a party deducts TDS while making a payment but fails to deposit it with the government, the expense is not allowed as a deduction. Despite this, several entities have failed to remit the deducted amounts, prompting CBDT to prepare for strict enforcement measures. A dedicated data analysis team at the Income Tax Office has compiled a list of entities involved in TDS-TCS irregularities, with frequent violators being targeted first.

There have also been instances where businesses repeatedly alter TDS amounts after deduction. Some firms manipulate expenses by showing multiple commission payments under different entries. For example, a company may initially deduct 10% TDS on consultation charges but later increase the reported payment amount and deduct an additional 10% TDS to adjust the figures.

In some group companies, loss-making firms transfer large sums (₹25-50 lakh) as commissions or other payments to profit-making companies and then deduct TDS on those amounts. Later, they modify the commission figures, leading to fluctuations in TDS amounts. Additionally, some businesses fail to record TDS/TCS deductions in their books and do not provide deposit receipts to the payees, effectively reducing the net payment.

Cases have also emerged where businesses deduct TDS and TCS but do not report it in their accounts, leading to complaints filed with the Income Tax Department. Tax expert Pramod Popat noted that such taxpayers often omit TDS and TCS details from their quarterly returns, prompting the CBDT to instruct strict action against them. Once TDS and TCS returns are filed, the details should reflect in Form 26AS, failing which tax refunds are withheld. This has led to situations where taxpayers themselves file complaints against defaulters when large sums are involved.