Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ----
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    CircularsService Tax
    How will the SBC be calculated for services under reverse charge mechanism?
    CircularsService Tax
    Whether SBC is a ‘Cess’ on tax’ and we need to calculate SBC @ 0.50% on the amount of service ...
    CircularsService Tax
    What would be effective rate of service tax and SBC post introduction of SBC?
    CircularsService Tax
    Whether separate accounting code will be there for Swachh Bharat Cess
    CircularsService Tax
    Whether SBC would be required to be mentioned separately in invoice?
    CircularsService Tax
    How will the SBC be calculated?
    CircularsService Tax
    Where will the money collected under SBC go?
    CircularsService Tax
    Why has SBC been imposed?
    CircularsService Tax
    Whether SBC would be leviable on exempted services and services in the negative list?
    CircularsService Tax
    What is the date of implementation of SBC?
    CircularsService Tax
    What is Swachh Bharat Cess (SBC)?
    ManualsIncome Tax
    STEPS NEED TO BE TAKEN AFTER APPROVAL ADVANCE PRICING AGREEMENT(APA)?
    ManualsIncome Tax
    What is the limit of PANCARD regarding payment to Life Insurance company ?
    ManualsIncome Tax
    What is the basic monetary limit required for PANCARD for amount deposit in mutual fund and shares?
    ManualsIncome Tax
    What is the basic limit for PANCARD for payment to foreign country?
    ManualsIncome Tax
    Whether PANCARD is require for opening account in bank?
    ManualsIncome Tax
    What is the limit of PANCARD for amount depositing in securities.?
    ManualsIncome Tax
    Is PANCARD is required for time deposit exceed a time of ₹ 5 lakhs?
    ManualsIncome Tax
    What is the Basic limit of PANCARD for sale purchase of immovable property?
    ManualsIncome Tax
    Is Permission is Required For Filing Of Revised Return?
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess reverse charge shifts liability to the service recipient, applying existing reverse charge notifications mutatis mutandis.
    Swachh Bharat Cess for services under reverse charge is payable by the service recipient: Chapter V provisions apply to SBC, and government notification makes the existing service tax reverse charge notification applicable to SBC mutatis mutandis, so recipients compute and discharge SBC under the same reverse charge rules.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess: not levied on service tax but imposed on the value of taxable services.
    The Swachh Bharat Cess is not a cess on service tax but is imposed as a separate charge measured on the value of taxable services, rather than being calculated on the amount of service tax as was done for Education Cess and SHE Cess.
    CircularsService Tax
    Show AI Summary
    Service tax plus Swachh Bharat Cess yields a combined rate after SBC introduction, affecting taxable services.
    The operative tax burden on taxable services equals the prevailing service tax rate plus the Swachh Bharat Cess, expressed in the FAQ as an additive formula (for example, service tax rate plus 0.5% SBC) to determine the overall effective rate after SBC's introduction.
    CircularsService Tax
    Show AI Summary
    Separate accounting code for Swachh Bharat Cess to be notified, creating distinct heads for collection, receipts, penalties and refunds.
    Separate accounting codes for the Swachh Bharat Cess will be notified in consultation with the Principal Chief Controller of Accounts, establishing distinct minor head classifications to record cess Tax Collection, Other Receipts, Penalties and Deduct Refunds with corresponding numeric codes for government accounting.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess must be shown separately on invoices and accounted for independently from service tax.
    Swachh Bharat Cess (SBC) is levied independently of service tax and must be charged, collected and paid separately; it should appear as a distinct line item on invoices (may be shown after service tax), be accounted for separately in books of account, and remitted under a separate accounting code, with treatment similar to education cesses.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess calculation mirrors service tax and is levied on the identical taxable value.
    The Swachh Bharat Cess is computed using the same methodology as service tax and is levied on the identical taxable value applied for service tax, with no separate valuation base or distinct computation formula for the Cess.
    CircularsService Tax
    Show AI Summary
    Proceeds of Swachh Bharat Cess credited to Consolidated Fund of India, usable after parliamentary appropriation for sanitation initiatives.
    Proceeds of the Swachh Bharat Cess are to be credited to the Consolidated Fund of India, and after parliamentary appropriation the Central Government may utilise such sums for financing and promoting Swachh Bharat initiatives or for related purposes.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat cess imposed to finance and promote sanitation initiatives, obliging service providers to collect and remit the levy.
    Imposition of Swachh Bharat Cess is a statutory levy on taxable services to generate revenue expressly for financing and promoting Swachh Bharat initiatives and related purposes, creating an obligation on service providers to collect and remit the cess so funds are available for the designated sanitation objectives.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess on exempted and negative list services is not leviable under the FAQ circular.
    The circular clarifies that Swachh Bharat Cess is not leviable on services which are fully exempt from service tax and on services covered by the negative list, limiting the cess's chargeability to taxable services only.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess implementation date fixed as 15 November 2015 under notification appointing its commencement.
    The Central Government appointed 15 November 2015 as the date on which provisions of the Swachh Bharat Cess come into effect, by notification No.21/2015 Service Tax dated 6 November 2015.
    CircularsService Tax
    Show AI Summary
    Swachh Bharat Cess applies as a service cess on taxable services, increasing service tax liability and compliance obligations.
    Swachh Bharat Cess is a statutory cess levied as a service cess under Chapter VI of the Finance Act, 2015, imposed on all taxable services and collected in accordance with the Act's levy and collection provisions, thereby increasing service tax liability and requiring compliance with service tax accounting and remittance rules.
    ManualsIncome Tax
    Show AI Summary
    Advance Pricing Agreement requires modified returns and extends reassessment deadlines for affected assessment years by tax authorities.
    Entry into an Advance Pricing Agreement fixing the arm's length price requires the taxpayer to file a modified return for each affected assessment year within three months from the end of the month in which the APA is executed. If an assessment was already completed, the Assessing Officer must reassess under the APA and complete that reassessment within one year from the end of the financial year in which the modified return is filed. If the assessment was pending, the Assessing Officer may complete it within an extended timeframe permitted for APA-related assessments.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for life insurance premium payments: quoting PAN mandatory when annual premiums meet statutory threshold.
    A payer must quote PAN when annual payments of life insurance premium to an insurer aggregate to Rs. 50,000 or more, the aggregation determining whether the PAN quoting obligation is triggered as a compliance mechanism for identification and reporting of premium payments.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for mutual fund and share deposits triggers mandatory identification and reporting when payments reach the statutory threshold.
    Quoting a Permanent Account Number (PAN) is mandatory for deposits into mutual funds and for share purchases when the payment amount is fifty thousand rupees or more, under the PAN provisions and implementing rules governing income-return and reporting obligations.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for foreign travel payments: cash disbursements above prescribed limit require PAN for travel, tour, or currency purchases.
    A PAN must be furnished where a single-instance cash payment connected with travel to a foreign country exceeds the prescribed cash threshold; this covers cash payments for fare, payments to travel agents or tour operators, payments to authorized persons under foreign exchange law, and purchases of foreign currency, while excluding travel to neighbouring countries and specified pilgrimage locations.
    ManualsIncome Tax
    Show AI Summary
    Permanent Account Number requirement: PAN is mandatory for opening bank accounts under income tax rules with no monetary threshold.
    Permanent Account Number (PAN) is mandatory for opening a bank account under the income tax statutory framework and implementing rules; the requirement applies generally and the source does not specify any monetary threshold limiting the obligation, reflecting PAN's function as an identification and compliance mechanism in return of income and assessment procedure contexts.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for securities transactions mandates furnishing PAN for deposits exceeding prescribed threshold to enable identity verification.
    A PAN furnishing requirement applies to sale and purchase of securities: where consideration in a securities transaction exceeds the statutory high-value threshold, the person transacting must furnish their Permanent Account Number to the counterparty, implementing identity verification and enabling tax reporting obligations under the income-tax rules.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for time deposits: PAN must be furnished when a time deposit exceeds the prescribed regulatory threshold.
    A PAN must be furnished when a depositor makes a time deposit with a bank, banking company, or banking institution that exceeds the prescribed monetary threshold; this imposes an identification and reporting obligation under the income tax PAN provisions and rules.
    ManualsIncome Tax
    Show AI Summary
    PAN requirement for immovable property transactions: PAN must be furnished where property value meets the statutory threshold.
    A Permanent Account Number (PAN) must be furnished for sale or purchase of immovable property when the transaction reaches the statutory value threshold, as part of PAN-related obligations in return of income and assessment procedure; this requirement applies to parties to the transaction to ensure tax documentation and compliance.
    ManualsIncome Tax
    Show AI Summary
    Right to file revised return: no prior permission required and permission-application cannot substitute for revision.
    No prior permission is required to file a revised return; the assessee has a right to submit a revised return. An application framed as seeking permission to revise the originally filed return cannot be treated as, or substitute for, a valid revised return, and therefore does not meet the statutory mechanism for revision.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters

      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)

      15 September, 2025

      Contents
      Acts
      Rules & Regulations
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Section 398 Consequences of failure to deduct or pay or, collect or pay.

      Income-tax Act, 2025

      At a Glance

      Document 1 reproduces Section 398 of the Income-tax Act, 2025 (enacted text). Document 2 reproduces Clause 398 of the Income Tax Bill, 2025 - Old Version (bill text). Both texts address consequences where a person required to deduct or collect tax fails to do so or fails to pay tax so deducted/collected. 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 assessee in default, (iii) interest liabilities with rates and periods, (iv) charge over assets, (v) time-limits for making the deeming order, and (vi) penalty condition. Definitions: the texts do not provide definitions for "principal officer", "payee", "buyer", etc., within the clause; such meanings are presumed from other provisions. Not stated in the document: legislative history, explanatory memorandum, or effective date.

      Statutory Provision Mode

      Text & Scope

      The clause prescribes consequences where a person required to deduct or collect tax under the Act (including the principal officer of a company, and where specified the employer u/s 392(2)(a)) fails to deduct/collect or, having deducted/collected, fails to pay the tax. The primary consequences are:

      • Deeming as an assessee in default in respect of the tax (sub-s. (1)).
      • A limited exception to the deeming rule where the payee/buyer/licensee/lessee has filed a return, included the relevant amount in income and paid tax thereon, and the person furnishes an accountant's certificate in prescribed form (sub-s. (2)).
      • Liability to pay simple interest at specified rates for delays in deduction/collection and for delay in payment after deduction/collection (sub-s. (3)(a)).
      • Interest payment prerequisites before furnishing the statement u/s 397(3)(b) (sub-s. (3)(b)).
      • Where not deemed an assessee in default under sub-s. (2), interest for the first part (1% per month) is payable only until the date of furnishing 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 person unless AO is satisfied there were no good and sufficient reasons for failure to deduct/collect and pay (sub-s. (7)).

      Interpretation

      The clause adopts a compliance-first approach: primary liability is placed squarely on the person required to deduct/collect/pay; however, it provides a narrow safe harbour where the recipient has declared and paid tax and an accountant certifies compliance. Interest is strict and two-tiered: a lower rate for delay in deduction/collection, and a higher rate for delay after deduction/collection. The charge on assets reflects a statutory prioritisation of withheld/collected tax as a trust-like obligation. The limitation and requirement of AO satisfaction for penalty indicate a balancing of Revenue powers and taxpayer protections. Not stated in the document: legislative intent beyond the text and any guidance on what constitutes "good and sufficient reasons."

      Exceptions/Provisos

      Primary exception: sub-s. (2) exempts the person from being deemed an assessee in default if the payee/buyer/licensee/lessee has (i) furnished return under s.263, (ii) taken the amount into account in computing income in that return, and (iii) paid tax due thereon, and the person furnishes an accountant's certificate in prescribed form. The text requires the accountant's certificate but does not specify whether the accountant must be a chartered accountant or other class: Not stated in the document.

      Illustrations

      • Example 1: A company fails to deduct TDS on 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 clause expressly interacts with sections 392 (employer), 394 (table of collectors), 397 (statements), 286 (time-bar provisions), 412 (penalty), and the cross-reference to correction statement provisions (either s.397(3)(f) or s.393(3)(f) depending on text). The clause makes the accountant's prescribed form and statement filing under s.397(3)(b)/(f) material to application of interest and limitation. Not stated in the document: any rules or circulars clarifying "good and sufficient reasons" or the form's content.

      Key Differences Between Document 1 (Enacted Section 398) and Document 2 (Bill - Old Version)

      • Structure and wording of sub-section (1): Document 1 and Document 2 are substantively similar in deeming a person an assessee in default for failure to deduct/collect/pay. Difference: Document 2 enumerates the three failures ((i) does not deduct or pay; (ii) does not collect or pay; (iii) after deducting or collecting fails to pay) explicitly as separate sub-clauses; Document 1 uses a compressed phrasing.
        • Practical impact: no substantive change in legal effect; primarily drafting style..
      • Cross-reference to correction statement time-limit: Document 1 refers to "correction statement ... u/s 397(3)(f)"; Document 2 refers to "correction statement ... u/s 393(3)(f)" (different section number).
        • Practical impact: this is a substantive drafting discrepancy - the correct cross-reference determines which procedural provision governs the correction statement and the 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 reasons, has failed to deduct and pay such tax."
        • Practical impact: Document 2 omits explicit reference to "collect" in the final clause and uses "charged" instead of "levied" and reverses phrasing ("from the person"). The omission of "collect" may narrow the penalty condition in the bill's drafting (potentially excluding failure to collect), whereas the enacted text (Document 1) expressly includes failure to collect. Thus, if the enacted text includes "collect," it expands the protective threshold for the person only where there is good reason for non-deduction/collection; if the bill lacked "collect," penalty protection might not apply to collectors. Practically, the difference affects penalty exposure for persons required to collect (e.g., sellers/licensors) versus those required only to deduct.

      Practical Implications

      • Compliance and risk areas: Persons required to deduct/collect must ensure timely deduction/collection and prompt deposit; failure exposes them to being treated as assessee in default, interest, and possible charge on assets. The safe-harbour requires the recipient to have: filed return under s.263, included the amount, and paid tax - and the deductor/collector must obtain the prescribed accountant certificate. Absence of any of these three elements results in default liability.
      • Record-keeping/evidence: Retain proof of deduction/collection, bank/payment advices showing deposit to Government, the accountant's certificate in prescribed form, documentation 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-reference to the correction statement provision may create disputes about the correct trigger for the two-year limb of limitation; practitioners should check the enacted cross-reference and any related procedural provisions.

      Key Takeaways

      • The provision makes non-deduction/non-collection/non-payment a deeming event creating assessee in default status with interest and asset-charge consequences.
      • A narrow safe-harbour exists if the payee/buyer/licensee/lessee has declared and paid tax and an accountant furnishes the prescribed certificate.
      • Interest is two-tiered: 1% per month for delay in deduction/collection; 1.5% per month for delay after deduction/collection until payment.
      • Tax not paid after deduction/collection becomes a statutory charge on all assets of the person required to deduct/collect.
      • Limitation: AO cannot make the deeming order after six years from end of the tax year or two years from end of the tax year in which the correction statement is delivered - whichever is later; sections 286(1) and (3) apply.
      • Penalty under s.412 requires AO satisfaction that there were no good and sufficient reasons for failure - wording differences between bill and enacted text concerning "collect" may affect penalty exposure for collectors.
      • Drafting inconsistencies (notably the cross-reference to the correction statement section and omission of "collect" in the penalty clause in the bill) may give rise to interpretive issues; check enacted text and subordinate rules for clarification.

      Full Text:

      Section 398 Consequences of failure to deduct or pay or, collect or pay.

      Topics

      ActsIncome Tax