I-T scam: 447 companies illegally diverted TDS worth Rs. 3,200cr
Even as the Rs. 12,650cr PNB scam rages on, another massive fraud has come to light in which 447 companies illegally diverted funds worth Rs. 3,200cr to their own businesses. The I-T department has found that these companies, mostly builders, were diverting employees' TDS instead of depositing it with the government. If the charges are proved, they can be jailed for upto seven years.
What is TDS?
The TDS (tax deducted at source) was devised as a tool to minimize tax evasion and simplify tax calculations. Here, tax is deducted right when income is generated (at the source) rather than at a later time. It is applicable on earnings from salary, commission etc. Employers are supposed to deduct TDS from employees and deposit it with the government within a specified duration.
So what were these companies doing?
Employees of these companies found mismatches when they filed their tax returns last year. After they complained, I-T found a politically-connected builder had diverted Rs. 100cr collected as TDS towards business. An infrastructure company diverted Rs. 14cr, while an IT company hasn't deposited Rs. 11cr. Some employers deposited a part of the amount collected. There were others who operated very briefly and then vanished.
I-T cracks down, warrants issued in some cases
Overall, 447 companies had misused Rs. 3,200cr collected as TDS from April'17 till now. The offences are punishable by 3months-7yrs in prison plus fines. I-T has initiated action. Warrants have been issued in some cases and accounts and property seized. Some have apologized and promised to pay dues. The I-T is contemplating adding cheating and breach of trust charges as employees were duped.
