Section 390 Deduction or collection at source and advance payment.

Income-tax Act, 2025

At a Glance

Clause 390 of the Income Tax Bill, 2025 - (Old Version) sets out modes by which income tax is payable under Chapter XIX: deduction or collection at source, advance payment, or payment u/s 392(2)(a). It clarifies that these modes apply irrespective of assessment timing, preserves the charge u/s 4(1), treats amounts remitted to the Central Government as tax paid on behalf of specified persons, and empowers the Board to make rules regarding credit and the tax year for credit. The provision affects taxpayers subject to TDS/TCS/advance payment and tax administration. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 390 is located in Chapter XIX, Part A (General) of the Income Tax Bill, 2025 (Old Version) and addresses "Deduction or collection at source and advance payment." The text defines the modes by which tax on income shall be payable under the Chapter and clarifies interplay with assessment and the charge of tax. Definitions: Not stated in the document. Context: The clause frames withholding (deduction/collection at source) and advance payment as primary modes of interim tax discharge, and provides rule-making authority to the Board for giving credit and determining the tax year for credit.

Statutory Provision Mode

Text & Scope

The clause covers the following elements:

• Modes of payment (sub-section (1)): It specifies three modes - (a) deduction or collection at source; (b) advance payment; (c) payment u/s 392(2)(a).
• Temporal independence (sub-section (2)): The obligation to pay by these modes applies "irrespective of the assessment to be made later than the relevant tax year." It thus treats these modes as independent of final assessment timing.
• Non-derogation from charge (sub-section (3)): It states that nothing in the section affects the charge of tax u/s 4(1).
• Additionality (sub-section (4)): Payment by the modes in sub-section (1) is "in addition to any other mode of tax collection to discharge the liability" in respect of income assessed for a tax year.
• Treatment of remitted sums (sub-section (5)): Tax deducted, collected, or paid and remitted to the Central Government shall be treated as payment of tax on behalf of specified persons: (a) the person "from or in respect of whose income or payment, such tax has been deducted or paid"; or (b) the person "from whom such tax has been collected."
• Rule-making by the Board (sub-section (6)): The Board may make rules for (a) giving credit of tax deducted or collected or paid to the person(s) in sub-section (5) and also a person other than those persons; and (b) "the tax year for which the credit shall be given."

Interpretation

Legislative intent as indicated: The clause treats withholding/collection and advance payment as mechanisms to secure tax revenue irrespective of final assessment, and contemplates crediting such payments against the taxpayer's liability. The text indicates a recognition that tax deduction/collection and advance payment are provisional modes intended to operate alongside assessment and other recovery measures. The rule-making clause indicates intent to prescribe administrative specifics (crediting and tax year attribution) by secondary legislation. More precise interpretive guidance (e.g., how credits are to be calculated) is not provided in the clause. Details on procedural mechanics are Not stated in the document.

Exceptions/Provisos

None contained in the clause itself. Any carve-outs or detailed conditions are Not stated in the document.

Illustrations

• Example 1: A payer deducts tax at source from a payment in a tax year and remits it to the Central Government. That remittance is treated as tax paid "on behalf of" the person from or in respect of whose payment the tax was deducted. (The clause states this principle; specifics such as timing of credit or reconciliation are Not stated in the document.)
• Example 2: Advance tax paid by a taxpayer in the relevant tax year will remain payable "irrespective of the assessment to be made later than the relevant tax year." (The clause sets out the independence of interim payments from later assessment; operational rules for adjustment are Not stated in the document.)

Interplay

The clause expressly preserves the charge u/s 4(1) and indicates that these payment modes are additional to other modes of tax collection. The Bill does not reference specific Rules, Notifications, or Circulars; the clause empowers the Board to make rules but does not itself specify those rules. Any detailed interplay with other procedural provisions or sections beyond section 4(1) and section 392(2)(a) is Not stated in the document.

Differences between Section 390 of the Income-tax Act, 2025 and Clause 390 of the Income Tax Bill, 2025 - Old Version

• Wording of sub-section (2): - Clause 390 (Bill): "irrespective of the assessment to be made later than the relevant tax year." - Section 390 (Act): "irrespective of the fact that the assessment in respect of such income is to be made in a later tax year."
  • Practical impact: The Act's wording is marginally more specific as to the subject of the later assessment ("in respect of such income"), clarifying that the later assessment relates to the income subject to the Chapter. The Bill's wording is broader and potentially ambiguous as to what "assessment to be made later" refers to. The practical effect is a minor clarity improvement in the enacted text; no substantive change in obligation is evident from the texts provided.
• Wording of sub-section (4): - Clause 390 (Bill): "shall be in addition to any other mode of tax collection to discharge the liability in respect of income assessed for a tax year." - Section 390 (Act): "shall be in addition to any other mode of tax recovery to discharge the liability in respect of income assessed for a tax year."
  • Practical impact: Bill uses "collection," Act uses "recovery." "Recovery" is a wider term that may encompass collection and other enforcement measures (e.g., attachment, penalties). The Act thus adopts a broader term, potentially emphasizing that TDS/TCS/advance payment are additional to all recovery mechanisms. Practically, this widens the interpretive scope of remedies available to the revenue beyond mere "collection" where recovery proceedings apply.
• Wording of sub-section (5): - Clause 390 (Bill): Two limbs: (a) "from or in respect of whose income or payment, such tax has been deducted or paid; or" (b) "from whom such tax has been collected." - Section 390 (Act): Three limbs: (a) "from whose income such tax has been deducted; or" (b) "from whom such tax has been collected; or" (c) "in respect of whose income such tax has been paid."
  • Practical impact: The enacted section restructures and separates the concepts into three clear sub-paragraphs, distinguishing deduction from collection and payment. The Bill combined some concepts ("from or in respect of whose income or payment ... deducted or paid") and had only two sub-paragraphs. The Act's three-limb formulation is clearer in identifying the person on whose behalf tax is treated as paid, explicitly including a separate limb for "paid" (section 392(2)(a) sums). This improves clarity on who receives credit for TDS/TCS/payment. Substantively, the Act clarifies credit entitlement mechanics; the Bill's language might have been open to narrower or confused readings.
• Wording of sub-section (6)(b): - Clause 390 (Bill): "the tax year for which the credit shall be given." - Section 390 (Act): "the tax year for which the credit may be given."
  • Practical impact: The Bill's use of "shall" suggests a mandatory duty on the Board to specify the tax year(s) for which credit is to be given; the Act's "may" grants discretionary rule-making power to the Board. Practically, this change reduces a prescriptive obligation and leaves rule-making scope to the Board; it could allow flexibility in prescribing tax year attribution rules, but may reduce certainty compared to a mandatory formulation.
• Structural and minor phrasing differences: - Several small rearrangements and wording refinements occur (e.g., "paid to the Central Government" appears in both but sub-paragraph sequencing differs).
  • Practical impact: Mostly clarificatory; no wholesale substantive divergence is evident in the provisions as provided. Changes tend to increase clarity of scope and provide discretion to the Board on rule-making.

Practical Implications

• Compliance and risk areas: Taxpayers and withholding agents must recognise that obligations to deduct/collect or make advance payments exist independently of eventual assessment. Failure to withhold/collect or to pay advance tax may expose taxpayers or deductors to payment liabilities and possible recovery actions. The clause does not set rates, thresholds, or due dates - those are Not stated in the document.
• Record-keeping/evidence points: The clause contemplates crediting of amounts remitted to the Central Government to specific persons; therefore, retention of records showing deduction/collection, remittance, and the person on whose behalf payment is made will be essential to substantiate entitlement to credit. Specific documentary requirements and forms are Not stated in the document.

Key Takeaways

• Clause 390 sets withholding (TDS/TCS), advance payment, and specified payments u/s 392(2)(a) as modes of paying income tax under Chapter XIX.
• These payment modes operate irrespective of the timing of assessment; they are provisional mechanisms separable from assessment outcomes.
• Payments remitted to the Central Government under these mechanisms are to be treated as tax paid on behalf of identified persons.
• The Board is empowered to make rules governing crediting of such payments and to determine the tax year for credit.
• The clause preserves the substantive charge to tax u/s 4(1) and states that interim payments are additional to other collection mechanisms.
• Specific procedural details (rates, forms, timelines, reconciliation processes) are Not stated in the document and fall to rules or other provisions.
• Certain drafting choices (e.g., "shall" vs "may" in the Board's power in the Bill) affect the degree of mandatory direction versus discretion, but procedural specifics remain for secondary rule-making.

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Full Text:

Section 390 Deduction or collection at source and advance payment.

Withholding tax and advance payments operate independently of assessment, securing provisional tax credits and rule making authority. Deduction or collection at source, advance payment, and specified payments under section 392(2)(a) operate independently of later assessment and are additional to other recovery measures; amounts remitted to the Central Government are treated as tax paid on behalf of the person from whose income tax was deducted, from whom tax was collected, or in respect of whose income tax was paid, and the Board may make rules for crediting such amounts and for attributing the tax year for credit.