Income Tax Act

Official PDF pages 491–495

SOURCE PDF PAGE 491
85.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, sub-section
(7) read as under :
“(7) The person responsible for paying any income or sum of the nature referred in sub-section
(6) shall deliver or cause to be delivered, one copy of the declaration referred therein, received
from the person to the Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, on or before the seventh day of the month following the
month in which the declaration is furnished to him.”
Sl.
No.
Person   Provisions for tax deduction at source
A   B   C
( d )   income in respect of units referred to in section
393(1) [Table: Sl. No. 4( i )];
( e )   interest referred to in section 393(1) [Table:
Sl. No. 5( i ), ( ii ) and ( iii )];
( f )   payment in respect of life insurance policy
referred to in section 393(1) [Table: Sl. No.
8( i )];
( g )   dividend referred to in section 393(1) (Table:
Sl. No. 7).
2.   Any person not being a
company or a firm or
an individual covered
in Sl. No. (1).
Sl. No. (1).C( a ) to ( f ).
Note.— The provisions of this sub-section shall not apply in case of a person referred to in
column B of the Table, other than an individual being a resident who is of the age of sixty
years or more at any time during the tax year, if the aggregate of amounts of any income or
sum of the nature referred to in provision mentioned in column C of this Table, is credited
or paid or likely to be credited or paid during the relevant tax year in which such income or
sum is to be included, exceeds the maximum amount not chargeable to tax.
Following clause ( b ) shall be inserted after clause ( a ) of sub-section (6) of
section 393 by the Finance Act, 2026, w.e.f. 1-4-2027:
( b ) The declaration referred* in clause ( a ) may also be furnished electronically to a
depository, as defined in section 2( e ) of the Depositories Act, 1996 (22 of 1996), where––
( i )   the income is from units, interest on securities or dividends, as the case
may be, as referred to in section 393(1) [Table: 4( i ), 5( i ) or 7];
( ii )   such units or securities are held with such depository; and
( iii )   such securities are listed on a recognised stock exchange,
in accordance with such procedure and manner, as may be prescribed.
85
[ (7) The person responsible for paying any income or sum of the nature referred to in
sub-section (6) shall deliver or cause to be delivered, such declaration referred therein,
received from the person, as specified in column B of the Table in sub-section (6) or
the depository, to the prescribed income-tax authority, on or before the seventh day
of the month immediately following the end of each quarter in which declaration is
furnished to him as per sub-section (6). ]

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SOURCE PDF PAGE 492
(8) Irrespective of anything contained in sub-section (6), the deduction of tax shall
not be made from the interest paid by an Offshore Banking Unit on borrowing
from or deposit made on or after 1st April, 2005, by a non-resident or a person not
ordinarily resident in India.
(9) Irrespective of anything contained in this Chapter, the deduction of tax shall
not be made from any payment to a person for, or on behalf of, the New Pension
System Trust referred to in Schedule VII (Table: Sl. No. 41).
(10) In a case other than that referred to in section 392(2)( a ), where under an
agreement or an arrangement, if the tax chargeable on any income of the recipient
referred to in this Chapter is to be borne by the payer, then, for the purposes of
deduction of tax, the income shall be increased to an amount which after deduction
of tax as per provisions of this Chapter becomes equal to the net amount payable
under such agreement or arrangement.
(11) The credit of any income or sum to any account, whether called “suspense
account” or by any other name, in the books of account of the person liable to pay
such income or sum, shall be deemed to be the credit of such income or sum to
the account of the payee and the provisions of this Chapter shall apply accordingly.
Collection of tax at source.
394.   (1) Every person, as specified in column C of the Table below shall collect
tax—
( a )   on receipts specified in column B;
( b )   at the rate as specified in column D; and
( c )   at the time of debiting of the amount payable by the buyer or licensee or
lessee to the account of the buyer or licensee or lessee or at the time of
receipt of such amount from the said buyer or licensee or lessee in cash
or by way of a cheque or a draft or any other mode, whichever is earlier.
TABLE
TAX COLLECTION AT SOURCE
Sl.
No.
Nature of receipt   Person   Rate of Tax Collect -
ed at Source
A   B   C   D
1.   Sale of alcoholic liquor for human con -
sumption.
Seller.  
86
[ 2% ]
2.   Sale of tendu leaves.   Seller.  
87
[ 2% ]
3.   Sale of timber whether obtained under
a forest lease or otherwise; or any other
forest produce (not being timber or tendu
leaves) obtained under a forest lease.
Seller.   2%
4.   Sale of scrap.   Seller.  
88
[ 2% ]
86.   Substituted for “1%” by the Finance Act, 2026, w.e.f.   1-4-2026 .
87.   Substituted for “5%”,   ibid .
88.   Substituted for “1%”,   ibid .

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SOURCE PDF PAGE 493
Sl.
No.
Nature of receipt   Person   Rate of Tax Collect -
ed at Source
A   B   C   D
5.   Sale of minerals, being coal or lignite or
iron ore.
Seller.  
88a
[ 2% ]
6.   Sale consideration exceeding ten lakh
rupees in case of—
( a )   motor vehicle; or
( b )   any other goods, as may be notified
by the Central Government.
Seller.   1%
7 .   Remittance   under   the   Liberalised
Remittance Scheme of an amount or
aggregate of the amounts exceeding ten
lakh rupees—
Authorised
dealer.
( a )  
88b
[ 2% ]   for
purposes of
education
or medical
treatment;
( b )   20% for pur -
poses   other
than   educa -
tion or medi -
cal treatment.
8 .   Sale of “overseas tour programme pack -
age” including expenses for travel or hotel
stay or boarding or lodging or any such
similar or related expenditure.
Seller.  
89
[ 2% ]
9.   Use of parking lot or toll plaza or mine
or quarry for the purpose of business, ex -
cluding mining and quarrying of mineral
oil (including petroleum and natural gas).
Licensor or
Lessor.
2%
(2) Irrespective of anything contained in sub-section (1) (Table: Sl. Nos. 1 to 5), the
collection of tax shall not to be made in respect of receipts specified in sub-section
(1) (Table: Sl. Nos. 1 to 5) in respect of the buyer, who is a resident in India, if he
furnishes a written declaration in duplicate in such form and manner, as may be
prescribed, to the person responsible for collecting tax, mentioning that such goods
are to be utilised—
( a )   for the purposes of manufacturing, processing or producing articles or
things or for generating power; and
( b )   not for trading purposes.
(3) Where no collection of tax is to be made under sub-section (2), the person re -
sponsible for collecting tax shall deliver or cause to be delivered, one copy of the
88a.   Substituted for “1%” by the Finance Act, 2026, w.e.f.   1-4-2026 .
88b.   Substituted for “5%”,   ibid .
89.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to their substitution, clauses ( a )
and ( b ) read as under :
“( a )   5% of amount or aggregate of amounts up to ten lakh rupees;
( b )   20% of amount or aggregate of amounts exceeding ten lakh rupees.”

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SOURCE PDF PAGE 494
90.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, clause ( c ) read
as under :
“( c )   when a certificate is issued under clause ( b ) ,   the person responsible for paying the
income or sum shall deduct the tax at the rate specified in such certificate, or deduct
no income-tax, as the case may be, till its validity.”
declaration referred to in that sub-section, to the Principal Chief Commissioner
or Chief Commissioner or Principal Commissioner or Commissioner, on or before
the seventh day of the month following the month of receipt of that declaration.
(4) The collection of tax shall not be made by the authorised dealer in respect of
receipt specified in sub-section (1) (Table: Sl. No.7),—
( a )   on such amount on which tax has been collected by the seller in respect
of receipt referred to in sub-section (1) (Table: Sl. No. 8);
( b )   if the amount being remitted out is a loan obtained from any financial
institution as defined in section 129(3)( b ), for the purpose of pursuing
any education.
(5) The collection of tax shall not be made by the authorised dealer or seller, in
respect of receipt specified in sub-section (1) (Table: Sl. Nos. 7 and 8), if the buyer
is liable to deduct tax at source under any other provisions of this Act and he has
deducted such tax.
(6) For the purposes of this section, “forest produce” shall have the same meaning
as defined in any State Act for the time being in force, or in the Indian Forest Act,
1927 (16 of 1927).
Certificates.
395.   (1) Where tax is required to be deducted on any income or sum under this
Chapter, then subject to the rules made under this Act,—
( a )   the payee may make an application before the Assessing Officer for
deduction of income-tax at a lower rate or no deduction of income-tax,
as the case may be; and
( b )   the Assessing Officer on being satisfied that the total income of the
payee justifies deduction of income-tax at a lower rate or no deduction
of income-tax, as the case may be, shall issue to him a certificate as
appropriate; and
90
[ ( c )   when a certificate is issued under clause ( b ) or sub-section (6), as the case
may be, the person responsible for paying the income or sum shall deduct
the tax at the rate specified in such certificate, or deduct no income-tax, as
the case may be, till its validity. ]
(2)( a ) The person responsible for paying to a non-resident any sum as mentioned in
section 393(2) (Table: Sl. No. 17), may make an application to the Assessing Officer
in such form and manner as may be prescribed, where he considers that the whole
of such sum would not be chargeable in the case of the recipient;
( b )   the application under clause ( a ) shall be for determination of the appropriate
proportion of the sum chargeable to tax, by the Assessing Officer in the manner as
may be prescribed; and

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SOURCE PDF PAGE 495
91.   Inserted by the Finance Act, 2026, w.e.f.   1-4-2026 .
( c )   when the determination is made by the Assessing Officer as per clause ( b ) ,   the tax
shall be deducted under section 393(2) (Table: Sl. No. 17) only on that proportion
of sum which is chargeable to tax under the Act.
(3) Where tax is required to be collected on any amount under this Chapter, then
subject to the rules made under this Act,—
( a )   the buyer or licensee or lessee may make an application before the
Assessing Officer for collection of tax at a lower rate;
( b )   the Assessing Officer on being satisfied that the total income of the buyer
or licensee or lessee justifies collection of tax at a lower rate, shall issue
to him a certificate as may be appropriate; and
( c )   when a certificate is issued under clause ( b ) ,   the person responsible for
collecting tax shall collect it at the rates specified in such certificate till
its validity.
(4)( a ) Every person deducting or collecting tax shall issue a certificate to the
deductee or collectee, as the case may be, specifying—
( i )   the amount of tax that has been deducted or collected;
( ii )   the rate at which tax has been deducted or collected; and
( iii )   any other particulars, as may be prescribed,
within such period as may be prescribed;
( b ) an employer referred to in section 392(2)( a ) shall issue a certificate to the
employee, in respect of whose income payment of tax has been made by the
employer, that the tax has been paid to the Central Government, and specify—
( i )   the amount of tax so paid;
( ii )   the rate at which tax has been paid; and
( iii )   any other particulars, as may be prescribed,
within such period, as may be prescribed.
(5) The Assessing Officer may cancel the certificate granted under sub-section (1)
or (3) after giving reasonable opportunity to the applicant.
91
[ (6) The application referred to in sub-section (1)( a ) may also be filed before the
prescribed income-tax authority, subject to such conditions as may be prescribed,
and such authority on electronic verification of the contents of the application, may—
( a )   either issue a certificate for deduction of income-tax at lower rate or no
deduction of income-tax; or
( b )   reject such application on account of non-fulfilment of the prescribed
conditions or on account of the application being incomplete. ]
Tax deducted is income received.
396.   The following sums shall be deemed as income received for the purposes of
computing the income of an assessee—
( a )   sums deducted under this Chapter; and