Section 476 — Failure to pay tax to credit of Central Government under Chapter XIX-B. Successor to s.276B of the 1961 Act.
Section 476 is in Chapter XXII — Offences and Prosecutions, which runs from section 473 to section 498.
Sub-section (1), as substituted by Act No. 4 of 2026 with effect from 1 April 2026, makes two failures punishable. Under clause (a), failure to pay the tax deducted at source by a person to the credit of the Central Government as required by or under Chapter XIX-B. Under clause (b), failure to pay tax, or to ensure payment of tax, to the credit of the Central Government in respect of income by way of winnings from online games as referred to in section 393(3) (Table: Sl. No. 2), excluding winnings wholly in kind as referred to in Note 2 to that Table, or in respect of any sum by way of consideration for transfer of a virtual digital asset as referred to in section 393(1) (Table: Sl. No. 8(vi)), excluding consideration wholly in kind as referred to in Note 6 to that Table.
The punishment is graded by the amount of tax. Under sub-clause (i), where the tax exceeds fifty lakh rupees, simple imprisonment for a term up to two years, or fine, or both. Under sub-clause (ii), where it exceeds ten lakh rupees but does not exceed fifty lakh rupees, simple imprisonment for a term up to six months, or fine, or both. Under sub-clause (iii), in any other case, fine. The provision as it stood before the substitution carried rigorous imprisonment of not less than three months extending to seven years, and fine, with no grading by amount.
Sub-section (2) provides a complete answer for a clause (1)(a) default: the section does not apply if the payment has been made to the credit of the Central Government on or before the time prescribed for filing the statement under section 397(3)(b) in respect of that payment.
Tax deducted at source is money already taken from someone else and held for the Government, so failing to pass it on is treated as an offence rather than a mere default. The 2026 substitution changed the shape of that offence: it replaced a single mandatory minimum sentence with a scale keyed to how much was withheld, so a small shortfall attracts a fine while a large one carries a custodial term. Sub-section (2) keeps the criminal provision for genuine non-payment rather than late payment, by letting a deductor who pays by the statement deadline out of the section entirely.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Punishment where the tax exceeds fifty lakh rupees | Simple imprisonment for a term up to two years, or fine, or both | Amount of tax not paid to the credit of the Central Government exceeds fifty lakh rupees | Sub-section (1)(i) |
| Punishment where the tax is between ten and fifty lakh rupees | Simple imprisonment for a term up to six months, or fine, or both | Amount of tax exceeds ten lakh rupees but does not exceed fifty lakh rupees | Sub-section (1)(ii) |
| Punishment in any other case | Fine | Where the amount of tax does not exceed ten lakh rupees; no imprisonment is provided | Sub-section (1)(iii) |
| Cut-off that takes a clause (1)(a) default outside the section | On or before the time prescribed for filing the statement under section 397(3)(b) | Payment of the deducted tax to the credit of the Central Government by that time | Sub-section (2) |
Each sentence is a maximum, not a minimum: sub-clauses (i) and (ii) read "for a term up to" two years and six months respectively, and imprisonment is in the alternative to fine in both, so a term is neither automatic nor of any fixed length. That is the substance of the 2026 change — the earlier text prescribed rigorous imprisonment of not less than three months, and what stands now is simple imprisonment with no floor. The escape in sub-section (2) is not general: it is expressed for the payment referred to in sub-section (1)(a), so a person facing clause (1)(b) cannot rely on it in those terms. And clause (1)(b) reaches beyond the person's own payment — it covers a failure to ensure payment of tax — while excluding winnings and consideration that are wholly in kind, which the Notes to the section 393 Tables deal with.
A company deducts Rs 70 lakh of tax at source during a quarter and does not pay it to the credit of the Central Government. Because the amount exceeds fifty lakh rupees, sub-clause (i) applies: simple imprisonment up to two years, or fine, or both. Had the company paid the Rs 70 lakh over on or before the time prescribed for filing the statement under section 397(3)(b), sub-section (2) would have taken the case out of the section altogether. Had the shortfall been Rs 8 lakh, only a fine would have been available under sub-clause (iii).
In a prosecution complaint brought against a deductor, usually after the deducted tax shows as unpaid in the statement filed under section 397. The date the tax reached the Central Government's credit, measured against the statement deadline, is what sub-section (2) turns on.
with simple imprisonment for a term up to two years, or with fine, or with both, where the amount of such tax exceeds fifty lakh rupees
with fine, in any other case
The provisions of this section shall not apply if the payment referred to in sub-section (1)(a) has been made to the credit of the Central Government on or before the time prescribed for filing the statement under section 397(3)(b) in respect of such payment.
See the full 1961 to 2025 concordance.
See the circulars index.