Income Tax 2025

Appearance

Failure to pay tax collected at source. ​

477(1) ​

Where a person fails to pay to the credit of the Central Government the tax collected by him as required under section 394, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and shall also be liable to fine.

477(2) The provisions of this section shall not apply if the payment of the tax ​

collected at source has been made to the credit of the Central Government at any time on or before the time prescribed for filing the statement under section 397(3)(b) in respect of such payment.

Explanation

Section Summary: ​

Section 477 of the new income tax law addresses the consequences of failing to pay tax collected at source (TCS) to the Central Government. It imposes strict penalties, including imprisonment and fines, for non-compliance. However, it provides relief if the tax is paid before the deadline for filing the relevant statement.

Key Changes: ​

  1. Introduction of Rigorous Imprisonment: Earlier laws may have imposed penalties or fines for non-payment of TCS, but this section introduces rigorous imprisonment as a punishment, with a minimum term of three months and a maximum of seven years.
  2. Relief Clause: The section now explicitly states that penalties will not apply if the TCS is paid before the deadline for filing the statement under Section 397(3)(b).

Practical Implications: ​

  • For Taxpayers/Businesses: Entities responsible for collecting tax at source must ensure timely payment to the Central Government. Failure to do so can result in severe legal consequences, including imprisonment.
  • For Compliance Processes: Businesses must closely monitor TCS collection and payment timelines to avoid penalties. The relief clause provides a window to rectify errors before the filing deadline.

Critical Concepts: ​

  • Tax Collected at Source (TCS): A tax collected by sellers or service providers from buyers at the time of sale or service provision, which must be remitted to the government.
  • Section 397(3)(b): Refers to the deadline for filing the TCS statement, which is typically the due date for submitting the quarterly TCS return.

Compliance Steps: ​

  1. Timely Collection: Ensure TCS is collected as per the applicable rates and rules.
  2. Timely Payment: Deposit the collected TCS to the Central Government within the prescribed due dates.
  3. Filing of Statement: File the TCS statement (Form 27EQ) by the due date specified under Section 397(3)(b).
  4. Reconciliation: Regularly reconcile TCS collected and paid to avoid discrepancies.

Examples: ​

  • Scenario 1: A business collects ₹1,00,000 as TCS during a quarter but fails to deposit it to the government by the due date. If the payment is not made before the filing deadline for the TCS statement, the business could face rigorous imprisonment and fines.
  • Scenario 2: The same business realizes the oversight and deposits the ₹1,00,000 TCS before filing the TCS statement. In this case, the penalties under Section 477(1) will not apply due to the relief clause in Section 477(2).

This section emphasizes the importance of timely compliance with TCS obligations to avoid severe legal consequences.