sunando ghosh (salaried) 30 January 2013

Client shows tds paid for me bu t never paid me

Hi Friends,
I have recently come across a situation and need your advice.

I work as independent consultant and have one of my clients whom i regularly provide services have deducted TDS to tune of Rs 10000 and deposited for me without my knowledge. I came to know about it as I can view TDS paid on my behalf thru Form 26AS and I did recently accidentally checked. I get payments in cash from said client and that too not very high amount say couple of thousands per month based on services rendered. I am not employed by the client in anyway and its a verbal consulting understanding on need basis.

Now I know the right thing to do is to ask the client why he has shown TDS for me for such high amount without my knowledge.

I was wondering what do i lose even if i keep mum and assume ignorance. Does it hurt me in anyway in long run. I never paid taxes and I was never intimated by client. Infact if i show the corresponding salary in my income; my tax return will be strong as i did not had much income in few months in this financial year.

Apart from morality issues; what else are the potential known risks if i follow this approach?

I just want to weigh in what risks and potential difficulties i may face.

Pls share your thoughts. Pls note that the deduction is under 194J which is contracting. This is also my situation as I am not employed. However The worry aspect is I have been paid say rs 40000 (rs forty thousand) all in all in last few months on which he has deducted TDS 10% but also he has shown extra couple of lakhs as payment on which he has done deduction of TDS @10% for me. But I was never informed; have never rendered any extra services and have never received these few lakhs shown in this form.

I am wondering why he would show these payments under sec 194J and also pay TDS @10% when he has not actually paid me anything and have not even informed me.

I do not want to confront but rather find out first potential implications.

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3 Replies

R RAJAGOPALAN (ADVOCATE) 31 January 2013

Your grievance is that a person has remitted TDS as deducted from a payment to you, whereas you have not been actually paid any such amount.

The proper remedy is to complain to the Income Tax Officer assessing that person, that the alleged payment to you is bogus,that no amount accrued to you from him, and that that person has thereby suppressed his taxable income.

If you have not received/nor are youentitled to receive any such amount/'income, you need not pay tax on it; you may however make a note of it in your return, or by a separate letter addressed to your Assessing Officer, explaining the actual facts.

sunando ghosh (salaried) 01 February 2013

thank you sir for your advice...I am trying to speak to him first an dif not then will follow ur advice

Neha Sharma (Student) 03 February 2013

As you've found that excess TDS has been shown in your Income Tax Form 26AS, I would first advise you to have a word with your client. He may have by mistake deposited the tds in your name although he intented to do the same on someone else's name.

And even if he did it purposefully, when you inform him that you have the power to intimate this to the Income Tax Officer, he will correct the same.