TaxTMI 
TaxTMI 
Comparison of section 398 "Consequences of failure to deduct or pay or, collect or pay." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....d. The provisions affect persons required to deduct/collect tax (including principal officers of companies), employers (per section 392(2)(a)), payees/buyers/licensees/lessees and the Revenue. Effective date or enactment date: Not stated in the document. Background & Scope Statutory hooks: the clause/provision is located at Clause/Section 398 within the Deduction and Collection at Source chapter of the Income Tax Bill/Act, 2025. It interacts expressly with sections 392, 393/394, 286 and 412, and with procedural provision for statements u/s 397(3)(b)/(f) in the texts. The text sets out (i) deeming a person an assessee in default where tax is not deducted/collected or paid, (ii) limited exceptions where a person will not be deemed an assess....
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.... of return by the payee/buyer/licensee/lessee (sub-s. (3)(c)). * When AO makes an order for default, interest as per that order is payable (sub-s. (3)(d)). * Where tax has been deducted or collected but not paid, tax plus simple interest becomes a charge on all assets of the person (sub-s. (4)). * Limitation: no order deeming a person an assessee in default shall be made after six years from end of the tax year in which tax was deductible/collectible, or after two years from end of tax year in which correction statement is delivered under the referenced section, whichever is later (sub-s. (5)). * Sections 286(1) and 286(3) apply to the time-limit in sub-s. (5) (sub-s. (6)). * No penalty u/s 412 shall be levied/charged on the perso....
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.... contractor payments. If the contractor files income tax return under s.263, includes the payment in taxable income and pays tax, and the company produces the prescribed accountant certificate, the company will not be deemed an assessee in default under sub-s. (2). (All elements referenced in the clause.) * Example 2: A seller charged TCS but failed to collect and remit the tax. Interest at 1% per month applies from when tax was collectible to date of collection; 1.5% per month applies from collection to payment. If seller never collected and buyer did not file return/pay tax, the seller remains an assessee in default and AO can make an order within the limitation periods stated. (All elements referenced in the clause.) Interplay The cl....
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....e calculation of the limitation period. If the enacted text uses s.397 while the bill used s.393, the practical consequence is that the limitation trigger aligns with whichever section actually prescribes correction statements; mismatches can create interpretive confusion and potential challenges over time-bar computation. * Penalty language in sub-section (7): Document 1 states "No penalty shall be levied u/s 412 on the person ... unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct or collect and pay such tax." Document 2 states "No penalty shall be charged u/s 412 from the person ... unless the Assessing Officer is satisfied that such person, without good and sufficient r....
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....ocumentation proving the payee's filed return and tax payment. Given the potential AO inquiry and the limitation periods, records should be preserved for at least six years (plus any periods under s.286 application). The clause itself does not prescribe retention periods beyond the limitation; retention advice is derived from the time-limits stated. * Procedural timing: Interest must be paid before furnishing the statement per s.397(3)(b) - taxpayers must factor interest computation into compliance workflows. Where the payee files return and pays tax, interest liability for the first leg is curtailed up to the date of the payee's return (sub-s. (3)(c)). * Limitation and litigation risk: The drafting discrepancy in the cross-refe....