D.—Collection and Recovery
When tax payable and when assessee deemed in default.
411(1)
Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 289 at the place and to the person mentioned in the notice shall be paid within—
- (a) thirty days of the service of the notice; or
- (b) such lesser period, as specified in the notice with the previous approval of the Joint Commissioner, where the Assessing Officer has any reason to believe that it shall be detrimental to revenue if the full period of thirty days is allowed.
411(2)
Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then––
- (a) such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings; and
- (b) any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
411(3)
If the amount specified in any notice of demand under section 289 is not paid within the period limited under sub-section (1),––
- (a) the assessee shall be liable to pay simple interest at 1% for every month or part of a month; and
- (b) such period shall commence from the day immediately following the end of the period mentioned in sub-section (1) and end with the day on which the amount is paid.
411(4)
No interest shall be charged under sub-section (3) on any amount for any period, where interest is charged on the same amount for the same period under section 398(3) on the amount of tax specified in the intimation issued under section 399.
411(5)
Nothing contained in sub-section (3) shall prevent the Assessing Officer, where an application is made by the assessee before the expiry of the due date under sub-section (1), to extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
411(6)
Where as a result of an order under section 287 or 288 or 359 or 363 or 365(10) or 368 or 378 or an order of the Settlement Commission under section 245D (4) of the Income-tax Act, 1961,––
- (a) the amount on which interest was payable under sub-section (3) had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded; and
- (b) if subsequent to such reduction, as a result of an order under said sections or section 377, the amount on which interest was payable is increased, the assessee shall be liable to pay interest under sub-section (3),— (i) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1); and (ii) ending with the day on which the amount is paid.
411(7)
In respect of any period commencing on or before the 31st March, 1989 and ending after that date, interest under sub-section (3) shall, in respect of so much of such period as falls after that date, be calculated at the rate of 1.5% for every month or part of a month.
411(8)
Irrespective of the provisions contained in sub-section (3), the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, on an application by the assessee, reduce or waive the amount of interest paid or payable by an assessee under sub-section (3) if he is satisfied that—
- (a) payment of such amount has caused or would cause genuine hardship to the assessee;
- (b) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and
- (c) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
411(9)
The order under sub-section (8) accepting or rejecting the application of the assessee, either in full or in part, shall be passed within twelve months from the end of the month in which the application is received.
411(10)
No order under sub-section (8) rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard.
411(11)
If the amount is not paid within the specified time under sub-section (1) or extended under sub-section (5), at the place and to the person mentioned in the said notice, the assessee shall be deemed to be in default.
411(12)
If, in a case where payment by instalments is allowed under sub-section (5), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section,––
- (a) the assessee shall be deemed to be in default as to the whole of the amount then outstanding; and
- (b) the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default.
411(13)
Where an assessee has presented an appeal under section 356 or 357 the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, till the time such appeal remains undisposed of.
411(14)
Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall—
- (a) not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India; and
- (b) continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.
411(15)
For the purposes of sub-section (14), income shall be deemed to have been brought into India, if—
- (a) it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India; or
- (b) the income, whether capitalised or not, has been brought into India in any form.
Section Summary:
Section 411 of the Income Tax Act outlines the rules for when tax is payable, when an assessee is deemed to be in default, and the consequences of non-payment. It also provides provisions for interest on delayed payments, extensions, instalments, and relief in specific circumstances. This section ensures timely tax collection while offering safeguards for taxpayers facing genuine hardships or legal disputes.
Key Changes:
- Interest Rate Adjustment: The interest rate for delayed payments is set at 1% per month (or part of a month) under sub-section (3). However, for periods before 31st March 1989, the rate is 1.5% per month (sub-section 7).
- Extension and Instalments: Assessees can apply for an extension or payment in instalments, subject to conditions (sub-section 5).
- Waiver of Interest: The Principal Chief Commissioner or Chief Commissioner can waive or reduce interest if the assessee faces genuine hardship or circumstances beyond their control (sub-section 8).
- Default Rules: Assessees are deemed in default if they fail to pay within the specified time or default on instalments (sub-sections 11 and 12).
- Appeals and Disputes: Assessees filing appeals may not be treated as in default for the disputed amount until the appeal is resolved (sub-section 13).
- Foreign Income Restrictions: Assessees with income from countries restricting remittance to India are not treated as in default for the tax on such income (sub-section 14).
Practical Implications:
- Timely Payment: Taxpayers must pay the demanded amount within 30 days (or a shorter period if specified) to avoid interest and being deemed in default.
- Interest Liability: Delayed payments attract interest at 1% per month, calculated from the day after the due date until the payment is made.
- Relief for Hardship: Taxpayers facing genuine financial hardship or circumstances beyond their control can apply for interest reduction or waiver.
- Instalment Defaults: Defaulting on even one instalment makes the entire outstanding amount due immediately.
- Appeals Protection: Filing an appeal can temporarily protect taxpayers from being treated as in default for the disputed amount.
- Foreign Income: Taxpayers with income from countries restricting remittance to India are not penalised for non-payment of tax on such income until the restriction is lifted.
Critical Concepts:
- Notice of Demand: A formal communication from the tax authorities specifying the amount payable, due date, and payment instructions.
- Simple Interest: Interest calculated only on the principal amount, without compounding.
- Deemed in Default: A legal status where the taxpayer is considered to have failed to meet their tax obligations, triggering recovery actions.
- Genuine Hardship: A situation where paying the tax or interest would cause significant financial difficulty to the taxpayer.
- Remittance Restrictions: Legal or regulatory barriers in a foreign country that prevent or limit the transfer of funds to India.
Compliance Steps:
- Respond to Notice of Demand: Pay the specified amount within 30 days (or the shorter period if applicable).
- Apply for Extension or Instalments: If unable to pay on time, submit an application before the due date for an extension or instalment plan.
- File Appeals Promptly: If disputing the demand, file an appeal to avoid being deemed in default for the disputed amount.
- Document Hardship: If applying for interest waiver, provide evidence of genuine hardship or circumstances beyond your control.
- Monitor Foreign Income Restrictions: If income is from a country with remittance restrictions, inform the Assessing Officer and provide relevant documentation.
Examples:
Scenario 1: A taxpayer receives a notice of demand for ₹1,00,000 payable within 30 days. They pay ₹80,000 within the deadline but fail to pay the remaining ₹20,000. Interest at 1% per month will apply to the unpaid ₹20,000 from the 31st day until the payment is made.
Scenario 2: A taxpayer facing financial hardship applies for an instalment plan. The Assessing Officer approves payment in 4 monthly instalments of ₹25,000 each. If the taxpayer misses the second instalment, the entire remaining balance (₹75,000) becomes due immediately.
Scenario 3: A taxpayer has income from a country that restricts remittance to India. The Assessing Officer does not treat them as in default for the tax on this income until the restriction is lifted.
Scenario 4: A taxpayer files an appeal against a notice of demand. The Assessing Officer decides not to treat them as in default for the disputed amount until the appeal is resolved.