Section 417 of the Income-tax Act, 2025

Section 417 — Recovery through State Government. Successor to s.227 of the 1961 Act.

Where this section sits

Section 417 is in Chapter XIX — Collection and Recovery of Tax, which runs from section 390 to section 430.

What this section does

The section applies where the recovery of tax in any area has been entrusted to a State Government under article 258(1) of the Constitution. In that case the State Government may direct, for that area or any part of it, that tax shall be recovered there with, and as an addition to, any municipal tax or local rate, by the same person and in the same manner as the municipal tax or local rate is recovered.

Why it is there

Where the Union has entrusted collection to a State, it is cheaper to attach the tax to a collection machinery that already reaches every household in the area than to build a parallel one. The section lets the State ride on the existing municipal tax or local rate, using the same collector and the same method.

Who it applies to

A State Government to which recovery of tax in an area has been entrusted under article 258(1) of the Constitution
The person who recovers the municipal tax or local rate in that area
A person from whom tax is recovered as an addition to a municipal tax or local rate

What this means in practice

Two conditions precede anything happening under this section: an entrustment to the State Government under article 258(1) of the Constitution, and a direction by that State Government. The direction may cover the whole entrusted area or only part of it. What the section changes is the mode of recovery — the same person and the same manner as for the municipal tax or local rate — and not the liability itself, which continues to arise under the Act.

Where you meet this section

A taxpayer in such an area meets it as tax appearing as an addition to the municipal tax or local rate demand, collected by the same person who collects that rate, rather than through the ordinary recovery machinery of the Department.

The words themselves

tax shall be recovered therein with, and as an addition to, any municipal tax or local rate, by the same person and in the same manner as the municipal tax or local rate is recovered

Section 417, Income-tax Act, 2025.

What people get wrong

Reading the section as itself entrusting recovery to a State Government. It operates only where recovery has already been entrusted under article 258(1) of the Constitution.
Assuming the arrangement applies automatically across the entrusted area. The State Government may direct it for that area or any part of it.
Treating the tax as converted into a municipal levy. Only the mode of recovery is borrowed; the tax remains one arising under this Act.

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.

227 - Recovery through State Government

See the full 1961 to 2025 concordance.

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.