New Delhi [India], January 24: The Supreme Court on Friday declined to entertain a Public Interest Litigation (PIL) that sought to declare the Tax Deducted at Source (TDS) system as “manifestly arbitrary, irrational, and violative of fundamental rights.”
A bench comprising Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar dismissed the petition filed by advocate Ashwini Upadhyay, advising him to approach the High Court with the matter.
The bench stated, “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.”
The PIL argued that the TDS system disproportionately places a heavy burden on assessees, particularly due to its significant administrative costs. The petition called for the TDS system to be declared unconstitutional under Articles 14 (Right to Equality), 19 (Right to Practice Profession), and 21 (Right to Life and Personal Liberty).
The petition listed the Centre, Ministry of Law and Justice, Law Commission, and NITI Aayog as respondents, urging the Court to direct NITI Aayog to consider the issues raised and suggest necessary reforms to the system. The petition also requested the Law Commission to review the legality of the TDS framework and issue a report within three months.
The PIL contended that the TDS system places an undue burden on economically weaker sections and small earners who may struggle with its technicalities. It also referenced Article 23 of the Constitution, claiming that forcing private citizens to collect taxes on behalf of the government constitutes forced labor.
“The regulatory framework surrounding TDS is excessively technical, requiring specialized knowledge that most assessees lack. This shifts sovereign responsibilities onto citizens without providing adequate resources or legal safeguards,” the petition stated.
While the TDS system helps ensure a steady inflow of revenue for the government, the petition argued that it imposes considerable administrative and financial obligations on individuals. These include determining applicable TDS rates, deducting taxes at the time of payment, depositing them with the government, issuing certificates, filing returns, and ensuring compliance with frequent legal amendments, all while facing penalties for inadvertent mistakes.
Under the Income Tax Act, TDS requires tax to be deducted at the time of payment and deposited with the tax authorities. This applies to payments such as salaries, fees, rents, commissions, and other taxable sums, with the deducted amount adjusted against the payee’s tax liability.