In a significant legal development, a Public Interest Litigation (PIL) has been filed in the Supreme Court of India seeking the abolition of the Tax Deducted at Source (TDS) system. The petition, lodged by lawyer Ashwini Upadhyay, argues that the TDS framework is “arbitrary and irrational,” violating fundamental rights enshrined in the Constitution.
The TDS system, established under the Income Tax Act, mandates that tax be deducted at the time of payment by the payer and subsequently deposited with the Income Tax Department. This system applies to various payments, including salaries, contractual fees, rents, and commissions. However, Upadhyay contends that this mechanism imposes undue burdens on taxpayers, particularly those from economically weaker sections and small earners who struggle to navigate its complexities.
In his petition, Upadhyay urges the Supreme Court to declare the TDS system as void and inoperative, citing violations of Articles 14 (right to equality), 19 (right to practice profession), and 21 (right to life and personal liberty) of the Constitution. He emphasizes that the TDS system disproportionately affects individuals below the taxable income threshold, as taxes are deducted at source regardless of their actual tax liability.
The PIL highlights the significant administrative and financial burdens imposed on taxpayers due to compliance requirements associated with TDS. These obligations include determining applicable TDS rates, issuing TDS certificates, filing returns, and defending against penalties for inadvertent errors. Upadhyay argues that these responsibilities unjustly shift sovereign duties from the government to private citizens without adequate compensation or resources.
“The regulatory framework surrounding TDS is excessively technical and often requires specialized legal and financial expertise, which most taxpayers lack,” Upadhyay stated. This complexity can lead to substantial expenses for individuals who must hire compliance staff or tax consultants to manage their obligations.
The petition also calls for a comprehensive review of the TDS system by the Law Commission within three months. Upadhyay has requested that NITI Aayog consider the contentions raised in his plea and suggest necessary changes to improve the current framework. The goal is to create a more equitable tax system that does not place an undue burden on individuals trying to comply with their tax obligations.
In addition to addressing constitutional violations, Upadhyay’s petition raises concerns about forced labor under Article 23 of the Constitution. He argues that imposing tax collection duties on private citizens equates to forced labor, as it compels individuals to take on responsibilities typically reserved for government entities.
This PIL brings forth critical questions about taxation in India and its impact on citizens’ rights. As discussions around tax reform continue, it highlights the need for a system that balances revenue generation with fairness and accessibility for all taxpayers.
The Supreme Court’s decision on this matter could set a precedent for how tax laws are interpreted and enforced in India. It may also spark broader conversations about reforming outdated systems that do not serve the needs of modern society.
As this case progresses through the courts, it serves as a reminder of the importance of ensuring that tax systems are just, transparent, and equitable for all citizens. The outcome could have far-reaching implications for taxpayers across India.
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