Income Tax Act

Official PDF pages 496–500

SOURCE PDF PAGE 496
92.   Substituted by the Finance Act, 2026, w.e.f.   1-10-2026 . Prior to its substitution, clause ( c )
read as under :
“( c )   the provisions of clause ( a ) shall not apply—
( i )   to a person who is required to deduct tax under provisions of section 393(1) [Table:
Sl. Nos. 2( i ), 3( i ) and 6( ii )];
( ii )   to a person referred to in section 393(4) [Table: Sl. No. 12.C( a )]; and
( iii )   a person notified in this regard by the Central Government.”
( b )   income-tax paid outside India by way of deduction in respect of which
an assessee is allowed a credit against the tax payable under this Act,
except tax paid under section 392(2)( a )   and tax deducted as per section 393(3)
(Table: Sl. No. 5).
Compliance and reporting.
397.   (1)( a ) Every person deducting or collecting tax shall apply for allotment
of a tax deduction and collection account number to the Assessing Officer
within such time as may be prescribed, if that person has not already been allotted
such number;
( b )   where a tax deduction and collection account number has been allotted to a
person, such person shall quote such number in all challans, statements, certificates
referred to in this Chapter, and in all documents pertaining to such transactions as
may be prescribed in the interests of revenue;
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[ ( c ) the provisions of clause ( a ) shall not apply to—
( i )   a person in respect of a transaction where he is required to deduct tax under
section 393(1) [Table: Sl. No. 2( i ), 3( i ) or 6( ii )]; or
( ii )   a person referred to in section 393(4) [Table: Sl. No. 12.C( a )]   in respect of a
transaction where he is required to deduct tax on consideration for transfer
of a virtual digital asset under section 393(1) [Table: Sl. No. 8( vi )]; or
( iii )   a resident individual or Hindu undivided family in respect of a transaction
where he is required to deduct tax on any consideration for the transfer of
any immovable property under section 393(2) [Table: Sl. No. 17]; or
( iv )   a person notified in this regard by the Central Government. ]
(2)( a ) Irrespective of anything contained in any other provision of this Act, every
person, entitled to receive any amount on which tax is deductible or, paying any
amount on which tax is collectible, shall furnish his valid Permanent Account Num -
ber to the person responsible for deducting or collecting tax;
( b ) in case of failure to comply with provisions of clause ( a )—
( i )   tax shall be deducted at the higher of the following rates:—
( A )   at the rate specified in the relevant provision of this Act; or
( B )   at the rate or rates in force; or
( C )   at the rate of 5% where tax is required to be deducted under section
393(1) [Table: Sl. No. 8( ii ) or 8( v )]; or 20% in any other case;

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SOURCE PDF PAGE 497
( ii )   tax shall be collected at the higher of the following rates, not exceeding
20%—
( A )   at twice the rate specified in the relevant provision of this Act; or
( B )   at the rate of 5%;
( c ) the provisions of clause ( b )( i ) shall not apply to a non-resident, not being a
company or a foreign company, in respect of—
( i )   payment of interest on long-term bonds as specified in section 393(2)
(Table: Sl. Nos. 2, 3 and 4); and
( ii )   any other payment subject to such conditions, as may be prescribed;
( d ) the provisions of clause ( b )( ii ) shall not apply to a non-resident who does not
have permanent establishment in India (which includes a fixed place of business
through which the business of the enterprise is wholly or partly carried on);
( e ) in respect of rent specified in section 393(1) [Table: Sl. No. 2( i )], if the tax is
required to be deducted as per clause ( b )( i ) ,   then such deduction shall not exceed
the amount of rent payable for the last month of the tax year or the last month of
the tenancy, as the case may be;
( f ) if a person does not furnish his valid Permanent Account Number in—
( i )   any declaration under section 393(6) or 394(2), then such declaration
becomes invalid;
( ii )   any application made under provisions of section 395(1) or (3), then no
certificate under such provisions shall be granted;
( g ) if any declaration becomes invalid under clause ( f )( i ), then the deductor or
collector shall deduct or collect tax as per the provisions of clause ( b )( i ) or ( ii ) as
the case may be;
( h ) the deductee or collectee shall furnish his valid Permanent Account Number to
the deductor or collector, as the case may be, and the same shall be indicated in all
bills, vouchers, correspondence and other documents which are sent to each other.
(3)( a )Every person responsible for deduction or collection of tax or employer
referred to in section 392(2)( a ) shall pay the amount so deducted or collected or
determined as per section 392(2)( b ) the credit of the Central Government, in such
time as may be prescribed;
( b ) every person responsible for deduction or collection of tax or employer referred
to in section 392(2)( a ) ,   after paying the tax to the credit of the Central Government
as per clause ( a ) ,   shall deliver or cause to be delivered to the prescribed income-tax
authority or the person authorised by such authority, a statement for such period,
in such form, verified in such manner, giving such particulars, and within such
time, as may be prescribed
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;
( c )   every prescribed authority as per clause ( b ), shall deliver a statement in such
form and manner as may be prescribed, to the buyer or licensor or lessee referred
to in section 394(1) (Table: Sl. Nos. 1 to 4 or 9);
( d ) every person responsible for paying to a non-resident, not being a company or a
foreign company, any sum, whether or not chargeable under this Act, shall furnish
the information relating to payment of such sum, in such form and manner as may
be prescribed;

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( e ) in case of an office of the Government,—
( i )   where the sum deducted under this Chapter or tax referred to in section
392(2)( a ); or
( ii )   where the sum collected under section 394(1) (Table: Sl. Nos. 1 to 5 or
9),
has been paid to the credit of the Central Government without the production of a
challan, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing
and Disbursing Officer or any other person, who is responsible for crediting such
sum or tax to the credit of the Central Government, shall deliver or cause to be
delivered to the prescribed authority or the person authorised by such authority, a
statement in such form, verified in such manner, giving such particulars and within
such time, as may be prescribed;
( f ) every person referred to in clause ( b ) or ( e ) may correct any discrepancy or
update the information furnished, in the statement delivered under the said clauses,
by delivering a correction statement in such form and verified in such manner as
may be prescribed, to the prescribed authority under the said clauses, within two
years from the end of the tax year in which such statement is required to be delivered
under the said clauses or under section 200 of the Income-tax Act, 1961 (43 of 1961);
( g )( i ) any banking company or co-operative society or public company referred to
in   N ote 1 to section 393(1) (Table: Sl. No. 5) responsible for paying to a resident
any income by way of interest, not exceeding the threshold limit mentioned in
section 393(1) [Table: Sl. No. 5( ii ) and ( iii )] ,   shall deliver or cause to be delivered to
the prescribed income-tax authority or the person authorised by such authority, a
statement in such form, verified in such manner, giving such particulars and within
such time, as may be prescribed;
( ii ) the Board may require any person, other than the person mentioned in sub-
clause ( i ), responsible for paying to a resident any income which is liable for de -
duction of tax at source under this Chapter to deliver or cause to be delivered to the
income-tax authority or the authorised person under sub-clause ( i ), a statement in
such form, verified in such manner, giving such particulars and within such time,
as may be prescribed;
( iii ) the person referred to in sub-clause ( i ) or sub-clause ( ii ) may deliver a
correction statement to correct any discrepancy or update the information
furnished, in the statement delivered under sub-clause ( i ) or sub-clause ( ii ) in such
form and manner of verification, as may be prescribed to the income-tax authority
referred to in sub-clause ( i );
( h )   any person responsible for collecting the tax who fails to collect the tax as per
the provisions of section 394, shall, irrespective of such failure, be liable to pay
the tax to the credit of the Central Government as per the provisions of clause ( a ).
Consequences of failure to deduct or pay or, collect or pay.
398.   (1) If a person, including the principal officer of a company,—
( a )   who is required to deduct or collect any amount under this Act; or
( b )   referred to in section 392(2)( a ), being an employer,
does not deduct or pay, or does not collect or pay, or after so deducting or collecting
fails to pay, the whole or any part of the tax, as required by or under this Act, then

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such person shall be deemed to be an assessee in default in respect of such tax in
addition to any other consequences which that person may incur under this Act.
(2) Irrespective of anything contained in sub-section (1), any person,—
( a )   including the principal officer of a company, who fails to deduct; or
( b )   responsible for collecting tax as per section 394(1) (Table: Sl.   Nos. 1 to
5 and 9), who fails to collect,
the whole or any part of the tax, as required under this Chapter, on the amount paid
or credited to the account of payee or, on the amount collected or debited to the
account of the buyer or licensee or lessee, as the case may be, shall not be deemed
to be an assessee in default in respect of such tax, if the payee or buyer or licensee
or lessee has—
( i )   furnished his return of income under section 263;
( ii )   taken into account the amount for computing income in that return of
income; and
( iii )   paid the tax due on the income declared by him in such return of income,
and the person furnishes a certificate to this effect from an accountant in the form
as may be prescribed.
(3) ( a ) Without prejudice to sub-section (1), if any person, as referred to in that
sub-section does not deduct or collect the whole or any part of the tax or after
deducting or collecting fails to pay the tax as required under this Act, he shall be
liable to pay simple interest—
( i )   at 1% for every month or part of a month on the amount of such tax from
the date on which such tax was deductible or collectible to the date on
which such tax is deducted or collected; and
( ii )   at 1.5% for every month or part of a month on the amount of such tax
from the date on which such tax was deducted or collected to the date
on which such tax is actually paid;
( b )   the interest referred to in clause ( a ) shall be paid before furnishing the statement
as per the provisions of section 397(3)( b );
( c )   if the person referred to in sub-section (1) is not deemed to be an assessee in
default under sub-section (2), then the interest as per clause ( a )( i ) is payable from
the date on which that tax was deductible or collectible to the date of furnishing
of return of income by the concerned payee or buyer or licensee or lessee, as the
case may be;
( d )   when an order is made by the Assessing Officer for the default under sub-section
(1), the interest shall be paid by the person as per such order.
(4) Where the tax has not been paid after it is deducted or collected, the amount of
the tax together with the amount of simple interest on it as referred to in sub-section
(3)( a ) shall be a charge upon all the assets of the person referred to in sub-section (1).
(5) The order shall not be made under sub-section (1) deeming a person to be an
assessee in default for failure to deduct or collect the whole or any part of the tax
from any person—
( a )   after six years from the end of the tax year in which tax was deductible
or collectible; or

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( b )   after two years from the end of the tax year in which the correction
statement is delivered under section 397(3)( f ) ,
whichever is later.
(6) The provisions of sections 286(1) and 286(3) shall apply to the time limit spec -
ified in sub-section (5).
(7) No penalty shall be levied under section 412 on the person mentioned in sub-
section (1), unless the Assessing Officer is satisfied that such person, without
good and sufficient reasons, has failed to deduct or collect and pay such tax.
Processing.
399.   (1) All statements of tax deducted at source or tax collected at source
including a correction statement shall be processed in the following
manner:—
( a )   the amounts deductible or collectible under this Chapter shall be com -
puted after making the following adjustments:—
( i )   any arithmetical error in the statement; or
( ii )   an incorrect claim apparent from any information in the statement;
( b )   the interest, if any, shall be computed on the basis of the amounts
deductible or collectible as reflected in the statement;
( c )   the fee, if any, shall be computed as per the provisions of section  
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[ 427(1)
and (2) ] ;
( d )   ( i )   the amount payable by; or
( ii )   the amount of refund due to,
the deductor or collector shall be determined after adjustment of the
amount computed under clauses ( b ) and ( c ) against any amount paid
under section 397(3) or 398 or  
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[ 427(1) and (2) ]   and any amount paid
otherwise by way of tax or interest or fee;
( e )   an intimation shall be prepared or generated and sent to the deductor
or collector specifying the amount determined to be payable by, or the
amount of refund due to, him under clause ( d ) ;
( f )   the amount of refund due to a deductor or collector in pursuance of
the determination under clause ( d ) shall be granted to the deductor or
collector.
(2) The intimation under this section shall be sent within one year from the end of
the tax year in which the statement is filed.
(3) The Board may make a scheme for centralised processing of statements, as
required under sub-section (1).
Power of Central Government to relax provisions of this Chapter.
400.   (1) The Central Government may, by notification provide that deduction or
collection of tax shall not be made or is to be made at such lower rate, from
such payment or receipt and in respect of such person or class of persons.
93.   Substituted for “427” by the Finance Act, 2026, w.e.f.   1-4-2026 .