TaxTMI 
TaxTMI 
Safeguarding Taxpayers from Double Taxation : Clause 401 of the Income Tax Bill, 2025 Vs. Section 205 of the Income-tax Act, 1961
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....es with the deductor, not the recipient of income. The doctrine embedded in these provisions is a manifestation of the principle that double taxation or unjust demands should not be made on taxpayers when the liability has already been discharged, albeit through another party. This commentary provides a detailed and structured analysis of Clause 401 of the Income Tax Bill, 2025, juxtaposed with Section 205 of the Income-tax Act, 1961. It explores the legislative intent, the precise legal framework, the practical and procedural implications, and the evolution of the provision, while also highlighting any ambiguities or potential issues in interpretation. Objective and Purpose The primary objective of both Clause 401 and Section 205 is to ....
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....alled upon to pay the tax himself to the extent to which tax has been deducted from that income." The language of both provisions is nearly identical, reflecting the intention to carry forward the established legal position into the new legislative framework. The only notable difference is the reference to "the foregoing provisions of this Chapter" in Section 205, which was substituted from a more detailed listing of TDS sections, to a more generic reference, thereby broadening the scope to cover all TDS provisions within the Chapter. 2. Scope and Application Both provisions operate in the context of TDS, which is governed by a specific chapter in the respective Acts. The bar applies only to the extent tax has been actually deducted from....
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.... initiating proceedings against the deductor for failure to deposit TDS, nor does it prevent the Revenue from disallowing the expenditure under other provisions (e.g., Section 40(a)(ia) of the 1961 Act) if TDS was not deducted or deposited. 4. Key Elements and Potential Ambiguities * Extent of Deduction: The phrase "to the extent to which tax has been deducted" is crucial. If partial deduction has been made, the bar applies only to that portion of income. The assessee may still be liable for the balance. * Proof of Deduction: The onus may be on the assessee to demonstrate that TDS has been deducted from his income. This is usually evidenced by TDS certificates (Form 16/16A), credit in Form 26AS, or other documentation. * Non-Deposit ....
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.... can still occur. * Litigation: Disputes often arise where the deductor has deducted but not deposited TDS, leading to hardship for the assessee in obtaining credit or refund. The provision, as interpreted by courts, seeks to minimize such hardship. Comparison with Section 205 of the Income-tax Act, 1961 * Textual Similarity: Clause 401 of the 2025 Bill is substantially the same as Section 205 of the 1961 Act, indicating legislative continuity and reaffirming the established legal position. * Scope: Both provisions apply to all TDS situations under the relevant chapter. The substitution in Section 205 (from listing specific sections to a generic reference) was intended to cover all forms of TDS, a feature retained in Clause 401. * ....
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....the TDS regime. Clause 401 of the 2025 Bill continues this policy, recognizing the centrality of TDS in the Indian tax system and the need to protect the taxpayer from administrative lapses by the deductor. Ambiguities and Issues in Interpretation While the provision is generally clear, certain ambiguities persist: * Proof of Deduction: In the absence of TDS certificates or credit in Form 26AS, the assessee may face difficulties in establishing that TDS has been deducted. * Timing Issues: Disputes may arise regarding the year in which credit for TDS is to be given, especially when the deductor deposits TDS belatedly. * Partial Deduction: Where only part of the tax has been deducted, the computation of the "extent" of the bar may be....