Section 477 — Failure to pay tax collected at source. Successor to s.276BB of the 1961 Act.
Section 477 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 it an offence for a person to fail to pay the tax collected by him to the credit of the Central Government as required under section 397(3)(a), and grades the punishment by amount. Under clause (a), where the amount of such tax exceeds fifty lakh rupees, the punishment is simple imprisonment for a term up to two years, or fine, or both. Under clause (b), where it exceeds ten lakh rupees but does not exceed fifty lakh rupees, the punishment is simple imprisonment for a term up to six months, or fine, or both. Under clause (c), in any other case, the punishment is fine. Before the substitution, sub-section (1) prescribed rigorous imprisonment for a term of not less than three months extending to seven years, and fine, without reference to the amount involved.
Sub-section (2) provides that the section shall not apply if the payment of the tax collected at source 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 collected at source is money held for the Government, and failure to pay it over is treated as an offence rather than a mere default. The 2026 substitution replaces a single mandatory minimum sentence with a graded scale keyed to the amount withheld, so that a small default is met with a fine and only a large one carries the risk of imprisonment; sub-section (2) leaves the door open for a collector who pays up before the statement is due.
| 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 collected and not paid to the credit of the Central Government exceeds fifty lakh rupees; the term is a maximum, and there is no minimum | Sub-section (1)(a), as substituted by Act No. 4 of 2026 w.e.f. 1-4-2026 |
| Punishment where the tax exceeds ten lakh but not fifty lakh rupees | Simple imprisonment for a term up to six months, or fine, or both | Amount of tax collected and not paid exceeds ten lakh rupees but does not exceed fifty lakh rupees | Sub-section (1)(b), as substituted by Act No. 4 of 2026 w.e.f. 1-4-2026 |
| Punishment in any other case | Fine | Where the amount is ten lakh rupees or less; no imprisonment is provided | Sub-section (1)(c), as substituted by Act No. 4 of 2026 w.e.f. 1-4-2026 |
The offence is not the collection or the shortfall but the failure to pay over what was collected, and sub-section (2) gives a complete answer: if the amount reached the credit of the Central Government on or before the time prescribed for filing the section 397(3)(b) statement for that payment, the section does not apply at all. The bands are measured on the tax collected and unpaid, and the terms are ceilings — "up to" two years and "up to" six months — with no minimum sentence and with fine available as an alternative in clauses (a) and (b). This is the substance of the 2026 change: the earlier text required rigorous imprisonment of not less than three months and up to seven years, and fine, in every case regardless of amount, so a prosecution decided on the old text will read very differently from one decided on the live provision.
A company collects Rs. 62 lakh of tax at source over a quarter and does not deposit it. Because the amount exceeds fifty lakh rupees, clause (1)(a) applies and the exposure is simple imprisonment of up to two years, or fine, or both. Had the amount been Rs. 8 lakh, clause (1)(c) would apply and the punishment would be fine only. Either way, sub-section (2) removes the offence entirely if the money was paid to the credit of the Central Government on or before the time prescribed for filing the section 397(3)(b) statement.
This is not a notice but a prosecution complaint, launched where tax collected at source has not reached the Government. In practice the first line of defence is sub-section (2) — proof that the payment was made on or before the time prescribed for the section 397(3)(b) statement.
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 simple imprisonment for a term up to six months or with fine, or with both, where the amount of such tax exceeds ten lakh rupees but does not exceed fifty lakh rupees
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 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.