The Income Tax Department has launched a crackdown on Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) defaulters for failing to deposit tax collections. Tax authorities have identified over 40,000 taxpayers who failed to deduct and deposit taxes collected during FY 2022-23 and FY 2023-24, bringing them under scrutiny.

The department has deployed advanced data analytics to track repeat offenders and investigate cases with significant discrepancies between tax deductions and advance tax payments. The exhaustive list was scrutinized for cases involving frequent changes and corrections in the deductee’s name, as well as instances where companies utilized sick units or subsidiaries with negative profit margins to manipulate audits.

The Central Board of Direct Taxes (CBDT) has instructed field officers to closely monitor cases where TDS returns have been revised multiple times with substantial reductions in the default amount. It has also formulated a 16-point plan to identify TDS defaults.

“TDS and TCS rates have been rationalized by reducing the number of rates and lowering thresholds above which TDS is deducted. Compliance has been relaxed for honest taxpayers, while strict action will be taken against willful defaulters to ensure a fair and equitable tax system,” explained a senior CBDT board member, highlighting the department’s carrot-and-stick approach.

Assessment officers have been tasked with identifying cases of significant disallowances under provisions that bar deductions when TDS has not been properly deducted and deposited.