Sub-section (1) sets out the three routes by which tax on income is payable under Chapter XIX — deduction or collection at source, advance payment, and payment under section 392(2)(a). Sub-section (2) makes that liability arise even though the assessment on the income is to be made in a later tax year, and sub-section (3) preserves the charge of tax on the income under section 4(1) untouched. Sub-section (4) provides that payment by these routes is in addition to any other mode of recovering tax on income assessed for a tax year. Sub-section (5) treats tax deducted, collected or paid under section 392(2)(a) and paid to the Central Government as payment of tax on behalf of the person from whose income it was deducted, from whom it was collected, or in respect of whose income it was paid. Sub-section (6) empowers the Board to make rules for giving credit for that tax — including to a person other than the one named in sub-section (5) — and for the tax year for which credit may be given.
Why it is there
The section is the foundation of the collection chapter: it authorises tax to be taken before the assessment that will eventually quantify it, without disturbing the charge under section 4(1), and it makes clear whose tax has been paid when someone else pays it over. Sub-section (6) exists because the person entitled to credit is not always the person from whom the tax came.
Who it applies to
A person whose income is subject to deduction or collection at source
A person liable to pay advance tax
A person making a payment under section 392(2)(a)
A person entitled to credit for tax deducted, collected or paid
The Board, in making rules for credit
What this means in practice
Tax comes in ahead of assessment through one of the three routes in sub-section (1), and the fact that the assessment will only happen in a later tax year is no answer to the obligation. Money deducted or collected and paid to the Central Government is the deductee's or collectee's tax, not the payer's, so the credit belongs to that person once it reaches the Government. Which year the credit falls in, and whether someone other than the person in sub-section (5) can take it, are governed by rules made by the Board under sub-section (6) rather than by this section. Paying through these routes does not close off other recovery mechanisms, which sub-section (4) preserves.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
Tax is deducted from a firm's receipts during the year and paid to the Central Government by the deductor. Sub-section (5) treats that amount as payment of tax on behalf of the firm from whose income it was deducted, not as the deductor's own tax, so the firm has the benefit of it although it parted with nothing itself. Sub-section (2) makes the tax payable by these routes even though the assessment on the income will only be made in a later tax year, and sub-section (3) leaves the charge under section 4(1) untouched — this is machinery for collection, not a second charge. Which tax year the credit lands in, and whether it can go to a person other than the one in sub-section (5), are left entirely to rules the Board may make.
Where you meet this section
A taxpayer meets it through its consequences rather than by name: tax deducted or collected at source, advance tax paid, and the credit for those prepaid taxes claimed in the return and allowed in the intimation. The rules the Board makes under sub-section (6) are what actually decide who gets that credit and for which tax year.
The words themselves
The tax deducted at source or collected at source or sum referred to in section 392(2)(a)under this Chapter and paid to the Central Government shall be treated as payment of tax on behalf of the person
Section 390(5), Income-tax Act, 2025.
What people get wrong
Treating the Chapter as displacing the charging section. Sub-section (3) says nothing in the section affects the charge of tax on the income under section 4(1).
Assuming the deducted amount is the deductor's tax. Sub-section (5) treats it as payment of tax on behalf of the person from whose income it was deducted, from whom it was collected, or in respect of whose income it was paid.
Looking here for the year in which credit is available. Sub-section (6)(b) leaves that to rules made by the Board, as it does credit for a person other than the one in sub-section (5).
Arguing that no tax is due because the assessment is for a later year. Sub-section (2) makes the liability payable irrespective of that.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
190 - Deduction at source and advance payment
199 - Credit for tax deducted
202 - Deduction only one mode of recovery
206C - Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc.
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 20/2021 — Guidelines under sub section 4 of section 194 o sub section 3 of section 194Q and sub section 1 i of section 206C of the income ta 2021-11-25
Circular No. 2/2017 — Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 2017-01-18
Circular 7/2014, dated 4-3-2014 — Dated 4 3 2014 section 200 of the income tax act 1961 deduction of tax at source duty of person deducting tax ex post facto extens 2014-03-04
Circular No. 256 — 1059. Instructions for deduction of tax at source from interest on deposits in joint names 1979-05-29
Circular No. 162 — 1290. Denial of income-tax clearance certificate to contractors on levy of penalty for concealment and/or conviction - Guidelines 1975-03-24
Circular No. 2 — Section 193 l Interest on Securities 1969-02-06
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 390. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
Court On Its Own Motion v CITHigh CourtHelps taxpayertagged s.199 CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
Incredible Unique Buildcon P Ltd v ITOHigh CourtHelps taxpayertagged s.199 My customer deducted TDS on my bills and deposited almost none of it, and I have no Form 16A. Can I still get the credit and stop the demand?
Sanjay Sudan v ACITHigh CourtHelps taxpayertagged s.199 My employer deducted TDS but never deposited it. The department has raised a demand on me and set my later refund off against it. Can it do that?
CBDT Circular 13/2021CBDTCuts both waystagged s.206C(1H) Our purchase attracts both 194Q and 206C(1H). Do we deduct as buyer or does the seller collect?
Who gets the TDS credit, and in which yeartagged s.199 The TDS shows in a year I have not offered the income, or against somebody else's PAN. What are the rules on credit?
Free calculators on VittSphere ONE for the very provision this page is about. They open in the same window.
LRS and TCS calculator— the collection under section 206C(1G) on a foreign remittance or tour package.
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
