Published 16:21 IST, January 24th 2025
SC Refuses to Examine PIL For Scrapping TDS System Under Income Tax Law
SC refused to examine a PIL seeking scrapping of tax deducted at source (TDS) framework under the Income Tax Act and said it was levied everywhere in the world.

New Delhi: The Supreme Court on Friday refused to examine a PIL seeking scrapping of tax deducted at source (TDS) framework under the Income Tax Act and said it was levied everywhere in the world.
A bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar noted that TDS is implemented in most countries worldwide and has been upheld in various judgments.
Key Points Raised by the PIL Against TDS
The PIL contested the TDS provisions under the Income Tax Act, which require the payer to deduct tax at the time of payment and deposit it with the income tax department. The deducted tax is then adjusted against the payee's tax liability.
SC Directs Petitioner to Delhi HC
"Sorry, we will not entertain it... It is very badly drafted. However, you can move the Delhi High Court,” said the bench.
Advocate Ashwini Upadhyay, who filed a PIL in his personal capacity through advocate Ashwani Dubey, argued for the abolition of the TDS system.
The Chief Justice of India (CJI) suggested that certain issues related to IT Rules could be significant and advised filing the matter in the Delhi High Court.
The Supreme Court bench, in its order, did not comment on the merits or demerits of the case, leaving it to the high court to reconsider the plea when filed.
Concerns About Administrative Burden
The petition challenged the TDS system as "arbitrary and irrational," alleging it violated fundamental rights, including equality, and named the Centre, Ministry of Law and Justice, Law Commission of India, and NITI Aayog as respondents.
It sought a declaration that the TDS system was unconstitutional, arguing it violated Articles 14 (right to equality), 19 (right to practice a profession), and 21 (right to life and personal liberty) of the Constitution.
The plea also requested directions for the NITI Aayog to examine the concerns raised and propose necessary reforms to the TDS system. Additionally, it urged the Law Commission to review the system’s legality and submit a report within three months.
According to the plea, the TDS system places significant administrative and financial burdens on taxpayers, requiring them to comply with complex rules, issue TDS certificates, file returns, and defend against penalties for minor errors. This compliance leads to substantial costs, including salaries for staff and professional fees for consultants, without any compensation.
Impact on Small Earners
The plea argued that the system disproportionately affects economically weaker sections and small earners, violating Article 14, as they lack the resources to navigate its complexities. It further cited Article 23, claiming that imposing tax collection duties on private individuals amounts to forced labour.
Additionally, the petition highlighted that the TDS system unfairly impacts individuals earning below the taxable income threshold, as tax is deducted at source regardless of their actual tax liability.
"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.
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Updated 16:21 IST, January 24th 2025