
The Supreme Court on Friday declined to entertain a Public Interest Litigation (PIL) that sought to challenge the Tax Deducted at Source (TDS) system as unconstitutional and burdensome.
The petition argued that the system was “arbitrary, irrational, and violative of fundamental rights.”
A bench consisting of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar rejected the plea filed by advocate Ashwini Upadhyay, advising him to approach the High Court instead. “Sorry, we will not entertain. It is very badly drafted. You can move the High Court. Some judgments have upheld it. We will not entertain. Dismissed,” remarked the bench.
Core Issues Raised in the Plea
The petition contended that the TDS system places a disproportionate administrative burden on taxpayers, violating their constitutional rights. Specifically, it claimed breaches of:
– Article 14 (Right to Equality): The framework unfairly impacts economically weaker individuals and small earners who lack the resources to handle its technicalities.
– Article 19 (Right to Practice Profession): Complying with the requirements hinders professional activities.
– Article 21 (Right to Life and Personal Liberty): The system’s demands were described as unreasonable and intrusive.
Additionally, the plea referred to Article 23, asserting that requiring private citizens to perform tax collection duties amounts to “forced labor.”
Proposed Reforms
The petition named the Centre, the Ministry of Law and Justice, the Law Commission, and NITI Aayog as respondents. It urged the Supreme Court to:
1. Direct NITI Aayog to evaluate the issues and suggest reforms to make the TDS system more equitable.
2. Instruct the Law Commission to review the legality of TDS and submit recommendations within three months.
Criticism of the Current System
The plea argued that the TDS framework imposes excessive technical and procedural requirements on taxpayers, such as:
– Determining applicable TDS rates for different transactions.
– Deducting taxes before making payments.
– Depositing taxes with the government within strict timelines.
– Issuing TDS certificates and filing returns.
– Navigating frequent amendments and addressing penalties for inadvertent errors.
These requirements often necessitate specialized legal and financial expertise, which many taxpayers lack, leading to additional costs and stress.
The petition acknowledged that TDS helps maintain a steady flow of revenue for the government but argued that it does so at the expense of taxpayers, particularly those with limited resources.
Court’s Verdict
While the Supreme Court refused to entertain the plea, the petitioner has the option to take the matter to the High Court. For now, the current TDS system under the Income Tax Act, which applies to payments like salaries, rents, and commissions, remains in force. Deducted amounts continue to be adjusted against the payee’s tax liability, as mandated by law.