TaxTMI 
TaxTMI 
Criminal Liability for TDS Defaults : Clause 476 of the Income Tax Bill, 2025 Vs. Section 276B of the Income-tax Act, 1961
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....uction at source (TDS) and tax collection at source (TCS) systems, ensuring that taxes withheld from taxpayers are duly remitted to the government. The legislative intent behind such provisions is to deter willful defaulters and ensure timely remittance of taxes, which are vital for government revenues. The evolution from Section 276B under the Income-tax Act, 1961 to Clause 476 in the proposed Income Tax Bill, 2025 reflects attempts to streamline, clarify, and possibly expand the scope of prosecutable offenses, while also incorporating procedural safeguards and exceptions. This commentary provides a comprehensive analysis of Clause 476, its objectives, operative mechanisms, and practical implications, followed by a detailed comparative a....
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....ated to deduct tax at source under Chapter XIX-B (the corresponding chapter for TDS provisions in the new Bill) and fails to deposit the same with the Central Government. * Failure to pay or ensure payment of tax under specific notes in Section 393: * Specifically, Note 3 in the Table in Section 393(3) and Note 6 to Section 393(1), Table Sl. No. 8. These references likely pertain to special scenarios or additional obligations for certain transactions, ensuring that the net is cast wide enough to cover emerging or specialized forms of tax deduction or collection. The use of the phrase "fails to pay or ensure payment" in sub-clause (b) indicates an extension of liability not only to those who directly fail to pay, but also to those who h....
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....Issues and Ambiguities Several interpretational issues may arise under Clause 476: * Scope of "ensure payment": The phrase "ensure payment" could be interpreted expansively to include not just the person directly responsible for deducting and paying the tax, but also those in supervisory or managerial roles. This could have significant implications for organizational liability and personal culpability of officers. * References to Notes in Section 393: The cross-references to specific notes in Section 393 may create interpretational challenges, especially if these notes are subject to change or are not clearly defined. The clarity and stability of such references are crucial for legal certainty. * Timing of Exception: The exception is....
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.... to Note 3 (Table in Section 393(3)) and Note 6 (Section 393(1), Table Sl. No. 8) Explicit references to Section 115-O(2), provisos to Sections 194B, 194R, 194S, and 194BA(2) (covering dividend distribution tax, winnings from lotteries, benefits/perquisites, virtual digital assets, etc.) Language on Ensuring Payment "Pay or ensure payment" (potentially broader) "Pay or ensure payment" (recently introduced, but with specific statutory references) Exception/Proviso Exception if payment made before time for filing statement u/s 397(3)(b) Exception if payment made before time for filing statement u/s 200(3) Penalty Structure Rigorous imprisonment (3 months to 7 years) and fine Rigorous imprisonment (3 months to 7 years) and ....
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....his liability, especially if the referenced notes are interpreted broadly. Ambiguities and Potential Issues * Cross-Referencing Complexity: The Bill's reliance on notes and tables for defining covered transactions may introduce interpretational complexity, as these may change over time or be drafted with less precision than statutory sections. * Overlap with Other Provisions: There is a risk of overlap or conflict with other penal provisions in the Bill, particularly if similar defaults are covered under multiple sections. * Transition Issues: Upon enactment of the new Bill, there may be transitional challenges in mapping obligations and offenses from the old Act to the new regime, especially for ongoing or historical defaults. ....