TaxTMI 
TaxTMI 
TaxTMI 
Criminal Liability for TCS Defaults : Clause 477 of Income Tax Bill, 2025 vs. Section 276BB of Income Tax Act, 1961
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....TCS. As India transitions to a new legislative framework under the Income Tax Bill, 2025, a close examination of Clause 477, its objectives, detailed provisions, practical implications, and comparison with the existing Section 276BB is necessary to understand the continuity, changes, and potential challenges in the enforcement of TCS obligations. Objective and Purpose Clause 477 and Section 276BB share a common legislative intent: to deter and penalize non-compliance in remitting TCS to the government. The rationale is rooted in the need to prevent misuse of collected funds, ensure timely flow of revenue, and uphold the accountability of persons entrusted with the collection and transmission of taxes. The provision aims to reinforce the s....
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....eting the failure to deposit TCS. The difference in referenced sections (section 394 in the Bill vs. section 206C in the Act) is merely a result of the renumbering and restructuring of the new law, not a substantive change in the nature of the offence. 2. Nature of Offence and Mens Rea Both provisions criminalize the failure to pay TCS, making it a cognizable offence. The language does not explicitly require the establishment of mens rea (criminal intent), indicating that the offence is one of strict liability. This is consistent with the legislative policy of tax laws, where the focus is on compliance rather than the intention behind non-compliance. Judicial pronouncements on Section 276BB have clarified that the mere failure to deposit....
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....pliance before the reporting deadline. The alignment of the exemption with the filing of the TCS statement ensures that prosecution is reserved for more egregious or persistent defaulters. 5. Reference to Relevant Sections The cross-references in Clause 477 (to section 394 and section 397(3)(b)) and in Section 276BB (to section 206C and its proviso) reflect the structural reorganization in the new Bill. section 394 of the Bill corresponds to the TCS provisions currently found in section 206C, while section 397(3)(b) corresponds to the procedural requirements for filing TCS returns. This ensures continuity in the regulatory framework, although stakeholders will need to familiarize themselves with the new numbering and structure. Comparati....
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....ttaching criminal liability to the misappropriation of tax collected on behalf of the state. The Indian approach is consistent with international norms, though the range of punishment is relatively severe, underscoring the importance attached to public revenue. 5. Potential Conflicts and Transitional Issues During the transition from the 1961 Act to the new Bill, care must be taken to avoid double jeopardy or inconsistent treatment of offences committed during the overlap period. The harmonization of the exemption proviso mitigates this risk, but administrative clarity will be required regarding the handling of ongoing prosecutions and retrospective application of the safe harbour. Ambiguities and Issues in Interpretation While both pro....
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....payment up to the filing deadline incentivizes prompt compliance. Businesses must track TCS collections and ensure timely deposit and filing of returns. The alignment of the exemption timeline with the filing of the TCS statement provides a clear compliance window but also necessitates vigilance regarding deadlines. 3. Enforcement and Prosecution Trends Historically, prosecution u/s 276BB has been invoked in cases of persistent or willful default, often after the failure to comply with notices or reminders. The continuation of this approach under Clause 477 is likely, with the proviso serving as a filter to exclude minor or technical breaches. However, the strict liability nature of the offence means that even unintentional lapses can att....