SC declines PIL seeking to scrap TDS system

New Delhi [India], January 24 (ANI): The Supreme Court on Friday refused to entertain a PIL seeking to declare that the Tax Deducted at Source (TDS) system is “manifestly arbitrary, irrational and violative of various fundamental rights”.

A bench of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar declined the plea filed by advocate petitioner advocate Ashwini Upadhyay and said he may approach High Court with his plea.

“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,” said the bench.

The petition contended that the TDS system disproportionately burdens assesses with significant administrative expenses.

“Declare the TDS system manifestly arbitrary, irrational and against Articles 14 (right to equality), 19 (right to practice profession) and 21 (right to life and personal liberty) of the Constitution, hence void and inoperative,” the plea stated.

The petition made the Centre, Ministry of Law and Justice, Law Commission, and NITI Aayog as parties in the case.

The plea urged the apex court to direct the NITI Ayog to consider contentions raised in the plea and suggest necessary changes in TDS system.

Law Commission should examine the legality of the TDS system and prepare a report within three months, it sought.

The petition said the system violated Article 14 by disproportionately burdening economically weaker sections and small earners who lack the capacity to navigate its technical requirements.

The plea while referring to Article 23 said the imposition of tax collection duties on private citizens amounted to forced labour.

“The regulatory and procedural framework surrounding TDS is excessively technical, often requiring specialised legal and financial expertise, which most assessees lack. The result is an unjust shifting of sovereign responsibilities from the government to private citizens without adequate compensation, resources, or legal safeguards,” it said.

While TDS ensures steady revenue inflow for the government, it imposes substantial administrative and financial obligations on the assessees, the advocate said.

These obligations include determining applicable TDS rates across various provisions, deducting taxes before payments or credits, depositing taxes with the government treasury within specified timeframes, issuing TDS certificates to deductees, filing returns and ensuring compliance with frequent legal amendments and defending against assessments, penalties in cases of inadvertent non-compliance, added the plea.

The TDS framework under the Income Tax Act mandates the deduction of tax at the time of payment by the payer and its deposit with the income tax department. These payments include salaries, contractual fees, rents, commissions and other taxable sums. The deducted amount is adjusted against the payee’s tax liability.