The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
Section 201(1) deems a person who does not deduct, does not pay, or after deducting fails to pay the whole or any part of the tax to be an assessee in default in respect of that tax. Its first proviso takes him out of that deeming, but only for a failure to deduct, and only if the payee has furnished his return under section 139, has taken the sum into account in computing income in that return and has paid the tax due on the income declared — and the deductor furnishes a certificate to that effect from an accountant, which rule 31ACB requires in Form 26A. Interest under section 201(1A) runs at two rates for two different periods: one per cent for every month or part of a month from the date the tax was deductible to the date it was deducted, and one and one-half per cent for every month or part of a month from the date it was deducted to the date it was actually paid. Where the first proviso to section 201(1) rescues the deductor from the tax, the proviso to section 201(1A) still charges the one per cent, from the date the tax was deductible to the date the payee furnished his return. Since 1 April 2025 an order under section 201(1) for a failure to deduct cannot be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which a correction statement is delivered under the first proviso to section 200(3), whichever is later; until 31 March 2025 the figure was seven years and the limit protected only a failure to deduct from a person resident in India. Section 201 governs a default on a sum paid or credited up to 31 March 2026; where the earlier of credit or payment falls on or after 1 April 2026, the consequences provision is section 398 of the Income-tax Act, 2025.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Section 201 of the Income-tax Act, 1961, as amended up to 2025. It bears on section 201, section 201(1A), section 201(1), section 201(1) first proviso, section 201(3), section 201(2), section Rule 31ACB, section Form 26A, section 200(3), section 276B, section 40(a)(ia), section 40(a)(i), section 119, section 221, section 192(1A), section 288(2), section 153, section 398 (Act of 2025) of the Income Tax Act 1961, in TDS Defaults, Demand, Recovery & Stay and How Tax Law Is Read matters.
The two rates in section 201(1A) are the single most misapplied piece of the section, and the mistake is almost always the same one: applying one rate across the whole period, or running clause (ii) from the due date of payment instead of the date of deduction. The clauses are period-specific. Take tax of Rs. 1,00,000 that was deductible on 10 June 2024, was deducted on 5 September 2024 and was paid on 20 November 2024. Count, as the Department and the TRACES system do, each calendar month the period touches — section 201(1A) does not define “month or part of a month”, and reading it as successive periods of thirty days would give fewer months and a smaller figure. Clause (i) covers 10 June to 5 September: June, July, August and September are four months or parts of months, so 4 x 1% x Rs. 1,00,000 = Rs. 4,000. Clause (ii) covers 5 September to 20 November: September, October and November are three months or parts, so 3 x 1.5% x Rs. 1,00,000 = Rs. 4,500. The interest is Rs. 4,000 + Rs. 4,500 = Rs. 8,500, and no part of the period carries both rates. Note also what clause (ii) does not say. It does not run from the date the tax became payable to the Government; it runs “from the date on which such tax was deducted”. So a deductor who deducts Rs. 1,00,000 on 5 September 2024 and pays it on 8 October 2024, one day past the due date, is charged from 5 September — September and October are two months or parts, 2 x 1.5% x Rs. 1,00,000 = Rs. 3,000, three per cent for a one-day delay. Pay by 7 October and there is no failure at all, so sub-section (1A) is never triggered — rule 30(2)(b) of the Income-tax Rules, 1962 gives a deductor other than a Government office seven days from the end of the month of deduction. Check your date against the right limb of that rule before assuming it: tax deducted in March is not due until 30 April under rule 30(2)(a), and a Government office paying without production of an income-tax challan must pay on the same day under rule 30(1)(a). The second thing to get right is that a payer who deducted and did not pay is in a materially worse position than one who never deducted, and the section says so four times over. The first proviso to sub-section (1) is worded for a person “who fails to deduct”, so the Form 26A route is closed to him; the charge on all his assets under sub-section (2) arises only “where the tax has not been paid as aforesaid after it is deducted”; the time limit in sub-section (3) protects only an order “for failure to deduct”, so there is no limitation in section 201 for the tax he withheld; and prosecution under section 276B is for failing to pay to the credit of the Central Government the tax deducted at source by him, not for failing to deduct — though since 1 October 2024 its proviso, inserted by Act No. 15 of 2024, takes the section off where that clause (a) payment — the tax deducted 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 for it under section 200(3). That proviso is confined by its own words to the clause (a) payment and does not reach the clause (b) limbs of section 276B. The same asymmetry runs into the disallowance sections. The second proviso to section 40(a)(ia), inserted by the Finance Act, 2012 with effect from 1 April 2013, deems the assessee to have deducted and paid the tax on the date the resident payee furnished his return where he is not deemed an assessee in default under the first proviso to section 201(1); section 40(a)(i) carries a matching second proviso for payees generally, which appears in the 2019 text of that section and not in the 2016 one. So the same Form 26A certificate that answers the section 201(1) demand also answers the disallowance. On double recovery of the tax itself, the library already holds Hindustan Coca Cola Beverage, where the Supreme Court proceeded on the Board's own Circular No. 275/201/95-IT(B) dated 29 January 1997 — quoted in the judgment as saying that “no demand visualized under Section 201 (1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee”, while adding that “this will not alter the liability to charge interest under Section 201 (1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271C of the Income-tax Act”. That is the shape of the relief on the statute too: the tax may go, the interest does not.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Marginal note: “Consequences of failure to deduct or pay”. 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,— (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200: Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee: Provided further that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid by the person in accordance with such order. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1). (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from any person, at any time after the expiry of six years from the end of the financial year in which payment is made or credit is given or two years from the end of the financial year in which the correction statement is delivered under the first proviso to sub-section (3) of section 200, whichever is later. (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to the time limit prescribed in sub-section (3). Explanation.—For the purposes of this section, the expression “accountant” shall have the meaning assigned to it in the Explanation to sub-section (2) of section 288. The section carries two footnotes only. The first, against the words “any person, at any time after the expiry of six years” in sub-section (3): “Sub. for ‘a person resident in India, at any time after the expiry of seven years’ by Act No. 15 of 2024, w.e.f. 1-4-2025.” The second, against the word “first” in sub-section (3): “Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025.”
As the section stands with effect from 1 April 2025, and for a sum paid or credited up to 31 March 2026, section 201 does five separate things, and they do not all reach the same defaulter. Sub-section (1) deems the defaulter an assessee in default in respect of the tax, and it catches three failures: not deducting, not paying, and deducting and then failing to pay. Its first proviso removes that deeming, but only for a person “who fails to deduct” — a person who deducted and kept the money cannot use it at all — and only on four cumulative conditions: the payee has furnished his return under section 139, has taken the sum into account in computing income in that return, has paid the tax due on the income declared in it, and the deductor furnishes a certificate to that effect from an accountant in the prescribed form. The prescribed form is Form 26A, under rule 31ACB of the Income-tax Rules, 1962: the footnote against the words “in such form as may be prescribed” reads, in three successive texts of the section, “See rule 31ACB and Form No. 26A”, and rule 31ACB provides that the certificate from an accountant under the first proviso to sub-section (1) of section 201 shall be furnished in Form 26A to the Director General of Income-tax (Systems) or the person authorised by him. “Accountant” takes the meaning in the Explanation to section 288(2). The second proviso to sub-section (1) is a separate protection and goes only to penalty under section 221, not to tax or interest. Sub-section (1A) charges simple interest and splits it. Clause (i) charges one per cent for every month or part of a month from the date on which the tax was deductible to the date on which it was deducted — the non-deduction period. Clause (ii) charges one and one-half per cent for every month or part of a month from the date on which the tax was deducted to the date on which it was actually paid — the deducted-but-unpaid period. Both are on the amount of the tax, both count a part of a month as a whole month, and neither is proportionate. The interest is to be paid before furnishing the statement under section 200(3). The first proviso to sub-section (1A) deals with the deductor rescued by the first proviso to sub-section (1): he still pays, but only the clause (i) one per cent, and only from the date the tax was deductible to the date of furnishing of return of income by the payee. The second proviso, inserted by Act No. 6 of 2022 with effect from 1 April 2022, provides that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid in accordance with that order. Sub-section (2) makes the tax and the sub-section (1A) interest a charge upon all the assets of the person or the company, but by its own words only “where the tax has not been paid as aforesaid after it is deducted”. A person who never deducted does not attract the charge. Sub-section (3) limits time, and again only for one of the failures: no order under sub-section (1) “for failure to deduct” may be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which the correction statement is delivered under the first proviso to section 200(3), whichever is later. Sub-section (4) applies section 153(3)(ii) and Explanation 1 to section 153 to that limit. Section 201 states no time limit for an order in respect of tax that was deducted and not paid. What changed and when. Sub-section (1A) was inserted by the Finance Act, 1966, with effect from 1 April 1966 and charged a flat annual rate: six per cent, then nine from 1 October 1967 (Taxation Laws (Amendment) Act, 1967), twelve from 1 April 1972 (Finance Act, 1972), fifteen from 1 October 1984 (Taxation Laws (Amendment) Act, 1984), eighteen from 1 June 1999 (Finance Act, 1999), fifteen again from 1 June 2001 (Finance Act, 2001), and a further substitution by the Taxation Laws (Amendment) Act, 2003 with retrospective effect from 8 September 2003. Sub-section (1) in its present opening form was substituted by the Finance Act, 2008 with retrospective effect from 1 June 2002. The words “at one per cent for every month or part of a month” were substituted for “twelve per cent per annum” by the Finance Act, 2007 with effect from 1 April 2008 — a single rate, for the whole period from deductibility to payment. The two-rate structure now in force was substituted by the Finance Act, 2010 with effect from 1 July 2010. The first proviso to sub-section (1), the first proviso to sub-section (1A) and the Explanation defining “accountant” were all inserted together by the Finance Act, 2012 with effect from 1 July 2012. Sub-section (3) has moved four times. It was inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010 in two clauses: (i) two years from the end of the financial year in which the statement is filed, where the statement referred to in section 200 has been filed, and (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case. The Finance Act, 2012 substituted “six” for “four” in clause (ii) with retrospective effect from 1 April 2010. The Finance (No. 2) Act, 2014 (Act No. 25 of 2014) substituted the whole sub-section with effect from 1 October 2014, giving a single seven-year limit running from the end of the financial year in which payment is made or credit is given and dropping the statement-filed clause. Act No. 23 of 2019 inserted, with effect from 1 September 2019, the alternative limb “or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later”, and in the same Act and on the same date substituted “payee” for “resident” in the first proviso to sub-section (1) and in the proviso to sub-section (1A), which is what opened the first proviso to non-resident payees. Act No. 15 of 2024 then substituted “any person, at any time after the expiry of six years” for “a person resident in India, at any time after the expiry of seven years”, and inserted the word “first” before “proviso to sub-section (3) of section 200”, both with effect from 1 April 2025. So from 1 April 2025 the period is a year shorter but the class of payee it covers is wider. Where the section stops. The Income-tax Act, 2025 takes over from the tax year beginning 1 April 2026, and its consequences provision is section 398. The Department's own transition FAQ answers the boundary question directly: the Act governing a TDS obligation turns on when the earlier of the event of credit or payment occurs, and where that event falls on or before 31 March 2026 the Income-tax Act, 1961 applies (Q6.1, and Q2.4 to the same effect; Q2.9 adds that the deposit obligation for tax deducted under the 1961 Act before the transition date continues under that Act). So a default on a sum paid or credited up to 31 March 2026 stays with section 201 — the deposit obligation, the interest and the order deeming a person an assessee in default alike — and section 398 governs from the first payment or credit on or after 1 April 2026. Almost every reader holding a section 201 order today is on the older side of that line.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid
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Handle my notice → Ask a CA on WhatsAppSection 201(1) deems a person who does not deduct, does not pay, or after deducting fails to pay the whole or any part of the tax to be an assessee in default in respect of that tax. Its first proviso takes him out of that deeming, but only for a failure to deduct, and only if the payee has furnished his return under section 139, has taken the sum into account in computing income in that return and has paid the tax due on the income declared — and the deductor furnishes a certificate to that effect from an accountant, which rule 31ACB requires in Form 26A. Interest under section 201(1A) runs at two rates for two different periods: one per cent for every month or part of a month from the date the tax was deductible to the date it was deducted, and one and one-half per cent for every month or part of a month from the date it was deducted to the date it was actually paid. Where the first proviso to section 201(1) rescues the deductor from the tax, the proviso to section 201(1A) still charges the one per cent, from the date the tax was deductible to the date the payee furnished his return. Since 1 April 2025 an order under section 201(1) for a failure to deduct cannot be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which a correction statement is delivered under the first proviso to section 200(3), whichever is later; until 31 March 2025 the figure was seven years and the limit protected only a failure to deduct from a person resident in India. Section 201 governs a default on a sum paid or credited up to 31 March 2026; where the earlier of credit or payment falls on or after 1 April 2026, the consequences provision is section 398 of the Income-tax Act, 2025. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 201, section 201(1A), section 201(1), section 201(1) first proviso, section 201(3), section 201(2), section Rule 31ACB, section Form 26A, section 200(3), section 276B, section 40(a)(ia), section 40(a)(i), section 119, section 221, section 192(1A), section 288(2), section 153, section 398 (Act of 2025) of the Income Tax Act 1961. It is reported as Section 201 of the Income-tax Act, 1961, as amended up to 2025. The two rates in section 201(1A) are the single most misapplied piece of the section, and the mistake is almost always the same one: applying one rate across the whole period, or running clause (ii) from the due date of payment instead of the date of deduction. The clauses are period-specific. Take tax of Rs. 1,00,000 that was deductible on 10 June 2024, was deducted on 5 September 2024 and was paid on 20 November 2024. Count, as the Department and the TRACES system do, each calendar month the period touches — section 201(1A) does not define “month or part of a month”, and reading it as successive periods of thirty days would give fewer months and a smaller figure. Clause (i) covers 10 June to 5 September: June, July, August and September are four months or parts of months, so 4 x 1% x Rs. 1,00,000 = Rs. 4,000. Clause (ii) covers 5 September to 20 November: September, October and November are three months or parts, so 3 x 1.5% x Rs. 1,00,000 = Rs. 4,500. The interest is Rs. 4,000 + Rs. 4,500 = Rs. 8,500, and no part of the period carries both rates. Note also what clause (ii) does not say. It does not run from the date the tax became payable to the Government; it runs “from the date on which such tax was deducted”. So a deductor who deducts Rs. 1,00,000 on 5 September 2024 and pays it on 8 October 2024, one day past the due date, is charged from 5 September — September and October are two months or parts, 2 x 1.5% x Rs. 1,00,000 = Rs. 3,000, three per cent for a one-day delay. Pay by 7 October and there is no failure at all, so sub-section (1A) is never triggered — rule 30(2)(b) of the Income-tax Rules, 1962 gives a deductor other than a Government office seven days from the end of the month of deduction. Check your date against the right limb of that rule before assuming it: tax deducted in March is not due until 30 April under rule 30(2)(a), and a Government office paying without production of an income-tax challan must pay on the same day under rule 30(1)(a). The second thing to get right is that a payer who deducted and did not pay is in a materially worse position than one who never deducted, and the section says so four times over. The first proviso to sub-section (1) is worded for a person “who fails to deduct”, so the Form 26A route is closed to him; the charge on all his assets under sub-section (2) arises only “where the tax has not been paid as aforesaid after it is deducted”; the time limit in sub-section (3) protects only an order “for failure to deduct”, so there is no limitation in section 201 for the tax he withheld; and prosecution under section 276B is for failing to pay to the credit of the Central Government the tax deducted at source by him, not for failing to deduct — though since 1 October 2024 its proviso, inserted by Act No. 15 of 2024, takes the section off where that clause (a) payment — the tax deducted 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 for it under section 200(3). That proviso is confined by its own words to the clause (a) payment and does not reach the clause (b) limbs of section 276B. The same asymmetry runs into the disallowance sections. The second proviso to section 40(a)(ia), inserted by the Finance Act, 2012 with effect from 1 April 2013, deems the assessee to have deducted and paid the tax on the date the resident payee furnished his return where he is not deemed an assessee in default under the first proviso to section 201(1); section 40(a)(i) carries a matching second proviso for payees generally, which appears in the 2019 text of that section and not in the 2016 one. So the same Form 26A certificate that answers the section 201(1) demand also answers the disallowance. On double recovery of the tax itself, the library already holds Hindustan Coca Cola Beverage, where the Supreme Court proceeded on the Board's own Circular No. 275/201/95-IT(B) dated 29 January 1997 — quoted in the judgment as saying that “no demand visualized under Section 201 (1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee”, while adding that “this will not alter the liability to charge interest under Section 201 (1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271C of the Income-tax Act”. That is the shape of the relief on the statute too: the tax may go, the interest does not. If it applies to you, the first step is this: Read the order and separate the tax demand under section 201(1) from the interest under section 201(1A). They have different escapes and only one of them is ever extinguished by the payee's own payment.
Marginal note: “Consequences of failure to deduct or pay”. 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,— (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub-section (3) of section 200: Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such payee: Provided further that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid by the person in accordance with such order. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1). (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from any person, at any time after the expiry of six years from the end of the financial year in which payment is made or credit is given or two years from the end of the financial year in which the correction statement is delivered under the first proviso to sub-section (3) of section 200, whichever is later. (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to the time limit prescribed in sub-section (3). Explanation.—For the purposes of this section, the expression “accountant” shall have the meaning assigned to it in the Explanation to sub-section (2) of section 288. The section carries two footnotes only. The first, against the words “any person, at any time after the expiry of six years” in sub-section (3): “Sub. for ‘a person resident in India, at any time after the expiry of seven years’ by Act No. 15 of 2024, w.e.f. 1-4-2025.” The second, against the word “first” in sub-section (3): “Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025.” The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As the section stands with effect from 1 April 2025, and for a sum paid or credited up to 31 March 2026, section 201 does five separate things, and they do not all reach the same defaulter. Sub-section (1) deems the defaulter an assessee in default in respect of the tax, and it catches three failures: not deducting, not paying, and deducting and then failing to pay. Its first proviso removes that deeming, but only for a person “who fails to deduct” — a person who deducted and kept the money cannot use it at all — and only on four cumulative conditions: the payee has furnished his return under section 139, has taken the sum into account in computing income in that return, has paid the tax due on the income declared in it, and the deductor furnishes a certificate to that effect from an accountant in the prescribed form. The prescribed form is Form 26A, under rule 31ACB of the Income-tax Rules, 1962: the footnote against the words “in such form as may be prescribed” reads, in three successive texts of the section, “See rule 31ACB and Form No. 26A”, and rule 31ACB provides that the certificate from an accountant under the first proviso to sub-section (1) of section 201 shall be furnished in Form 26A to the Director General of Income-tax (Systems) or the person authorised by him. “Accountant” takes the meaning in the Explanation to section 288(2). The second proviso to sub-section (1) is a separate protection and goes only to penalty under section 221, not to tax or interest. Sub-section (1A) charges simple interest and splits it. Clause (i) charges one per cent for every month or part of a month from the date on which the tax was deductible to the date on which it was deducted — the non-deduction period. Clause (ii) charges one and one-half per cent for every month or part of a month from the date on which the tax was deducted to the date on which it was actually paid — the deducted-but-unpaid period. Both are on the amount of the tax, both count a part of a month as a whole month, and neither is proportionate. The interest is to be paid before furnishing the statement under section 200(3). The first proviso to sub-section (1A) deals with the deductor rescued by the first proviso to sub-section (1): he still pays, but only the clause (i) one per cent, and only from the date the tax was deductible to the date of furnishing of return of income by the payee. The second proviso, inserted by Act No. 6 of 2022 with effect from 1 April 2022, provides that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid in accordance with that order. Sub-section (2) makes the tax and the sub-section (1A) interest a charge upon all the assets of the person or the company, but by its own words only “where the tax has not been paid as aforesaid after it is deducted”. A person who never deducted does not attract the charge. Sub-section (3) limits time, and again only for one of the failures: no order under sub-section (1) “for failure to deduct” may be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which the correction statement is delivered under the first proviso to section 200(3), whichever is later. Sub-section (4) applies section 153(3)(ii) and Explanation 1 to section 153 to that limit. Section 201 states no time limit for an order in respect of tax that was deducted and not paid. What changed and when. Sub-section (1A) was inserted by the Finance Act, 1966, with effect from 1 April 1966 and charged a flat annual rate: six per cent, then nine from 1 October 1967 (Taxation Laws (Amendment) Act, 1967), twelve from 1 April 1972 (Finance Act, 1972), fifteen from 1 October 1984 (Taxation Laws (Amendment) Act, 1984), eighteen from 1 June 1999 (Finance Act, 1999), fifteen again from 1 June 2001 (Finance Act, 2001), and a further substitution by the Taxation Laws (Amendment) Act, 2003 with retrospective effect from 8 September 2003. Sub-section (1) in its present opening form was substituted by the Finance Act, 2008 with retrospective effect from 1 June 2002. The words “at one per cent for every month or part of a month” were substituted for “twelve per cent per annum” by the Finance Act, 2007 with effect from 1 April 2008 — a single rate, for the whole period from deductibility to payment. The two-rate structure now in force was substituted by the Finance Act, 2010 with effect from 1 July 2010. The first proviso to sub-section (1), the first proviso to sub-section (1A) and the Explanation defining “accountant” were all inserted together by the Finance Act, 2012 with effect from 1 July 2012. Sub-section (3) has moved four times. It was inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010 in two clauses: (i) two years from the end of the financial year in which the statement is filed, where the statement referred to in section 200 has been filed, and (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case. The Finance Act, 2012 substituted “six” for “four” in clause (ii) with retrospective effect from 1 April 2010. The Finance (No. 2) Act, 2014 (Act No. 25 of 2014) substituted the whole sub-section with effect from 1 October 2014, giving a single seven-year limit running from the end of the financial year in which payment is made or credit is given and dropping the statement-filed clause. Act No. 23 of 2019 inserted, with effect from 1 September 2019, the alternative limb “or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later”, and in the same Act and on the same date substituted “payee” for “resident” in the first proviso to sub-section (1) and in the proviso to sub-section (1A), which is what opened the first proviso to non-resident payees. Act No. 15 of 2024 then substituted “any person, at any time after the expiry of six years” for “a person resident in India, at any time after the expiry of seven years”, and inserted the word “first” before “proviso to sub-section (3) of section 200”, both with effect from 1 April 2025. So from 1 April 2025 the period is a year shorter but the class of payee it covers is wider. Where the section stops. The Income-tax Act, 2025 takes over from the tax year beginning 1 April 2026, and its consequences provision is section 398. The Department's own transition FAQ answers the boundary question directly: the Act governing a TDS obligation turns on when the earlier of the event of credit or payment occurs, and where that event falls on or before 31 March 2026 the Income-tax Act, 1961 applies (Q6.1, and Q2.4 to the same effect; Q2.9 adds that the deposit obligation for tax deducted under the 1961 Act before the transition date continues under that Act). So a default on a sum paid or credited up to 31 March 2026 stays with section 201 — the deposit obligation, the interest and the order deeming a person an assessee in default alike — and section 398 governs from the first payment or credit on or after 1 April 2026. Almost every reader holding a section 201 order today is on the older side of that line.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid"
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Section 201 of the Income-tax Act, 1961, as amended up to 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 201, section 201(1A), section 201(1), section 201(1) first proviso, section 201(3), section 201(2), section Rule 31ACB, section Form 26A, section 200(3), section 276B, section 40(a)(ia), section 40(a)(i), section 119, section 221, section 192(1A), section 288(2), section 153, section 398 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As the section stands with effect from 1 April 2025, and for a sum paid or credited up to 31 March 2026, section 201 does five separate things, and they do not all reach the same defaulter. Sub-section (1) deems the defaulter an assessee in default in respect of the tax, and it catches three failures: not deducting, not paying, and deducting and then failing to pay. Its first proviso removes that deeming, but only for a person “who fails to deduct” — a person who deducted and kept the money cannot use it at all — and only on four cumulative conditions: the payee has furnished his return under section 139, has taken the sum into account in computing income in that return, has paid the tax due on the income declared in it, and the deductor furnishes a certificate to that effect from an accountant in the prescribed form. The prescribed form is Form 26A, under rule 31ACB of the Income-tax Rules, 1962: the footnote against the words “in such form as may be prescribed” reads, in three successive texts of the section, “See rule 31ACB and Form No. 26A”, and rule 31ACB provides that the certificate from an accountant under the first proviso to sub-section (1) of section 201 shall be furnished in Form 26A to the Director General of Income-tax (Systems) or the person authorised by him. “Accountant” takes the meaning in the Explanation to section 288(2). The second proviso to sub-section (1) is a separate protection and goes only to penalty under section 221, not to tax or interest. Sub-section (1A) charges simple interest and splits it. Clause (i) charges one per cent for every month or part of a month from the date on which the tax was deductible to the date on which it was deducted — the non-deduction period. Clause (ii) charges one and one-half per cent for every month or part of a month from the date on which the tax was deducted to the date on which it was actually paid — the deducted-but-unpaid period. Both are on the amount of the tax, both count a part of a month as a whole month, and neither is proportionate. The interest is to be paid before furnishing the statement under section 200(3). The first proviso to sub-section (1A) deals with the deductor rescued by the first proviso to sub-section (1): he still pays, but only the clause (i) one per cent, and only from the date the tax was deductible to the date of furnishing of return of income by the payee. The second proviso, inserted by Act No. 6 of 2022 with effect from 1 April 2022, provides that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid in accordance with that order. Sub-section (2) makes the tax and the sub-section (1A) interest a charge upon all the assets of the person or the company, but by its own words only “where the tax has not been paid as aforesaid after it is deducted”. A person who never deducted does not attract the charge. Sub-section (3) limits time, and again only for one of the failures: no order under sub-section (1) “for failure to deduct” may be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which the correction statement is delivered under the first proviso to section 200(3), whichever is later. Sub-section (4) applies section 153(3)(ii) and Explanation 1 to section 153 to that limit. Section 201 states no time limit for an order in respect of tax that was deducted and not paid. What changed and when. Sub-section (1A) was inserted by the Finance Act, 1966, with effect from 1 April 1966 and charged a flat annual rate: six per cent, then nine from 1 October 1967 (Taxation Laws (Amendment) Act, 1967), twelve from 1 April 1972 (Finance Act, 1972), fifteen from 1 October 1984 (Taxation Laws (Amendment) Act, 1984), eighteen from 1 June 1999 (Finance Act, 1999), fifteen again from 1 June 2001 (Finance Act, 2001), and a further substitution by the Taxation Laws (Amendment) Act, 2003 with retrospective effect from 8 September 2003. Sub-section (1) in its present opening form was substituted by the Finance Act, 2008 with retrospective effect from 1 June 2002. The words “at one per cent for every month or part of a month” were substituted for “twelve per cent per annum” by the Finance Act, 2007 with effect from 1 April 2008 — a single rate, for the whole period from deductibility to payment. The two-rate structure now in force was substituted by the Finance Act, 2010 with effect from 1 July 2010. The first proviso to sub-section (1), the first proviso to sub-section (1A) and the Explanation defining “accountant” were all inserted together by the Finance Act, 2012 with effect from 1 July 2012. Sub-section (3) has moved four times. It was inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010 in two clauses: (i) two years from the end of the financial year in which the statement is filed, where the statement referred to in section 200 has been filed, and (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case. The Finance Act, 2012 substituted “six” for “four” in clause (ii) with retrospective effect from 1 April 2010. The Finance (No. 2) Act, 2014 (Act No. 25 of 2014) substituted the whole sub-section with effect from 1 October 2014, giving a single seven-year limit running from the end of the financial year in which payment is made or credit is given and dropping the statement-filed clause. Act No. 23 of 2019 inserted, with effect from 1 September 2019, the alternative limb “or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later”, and in the same Act and on the same date substituted “payee” for “resident” in the first proviso to sub-section (1) and in the proviso to sub-section (1A), which is what opened the first proviso to non-resident payees. Act No. 15 of 2024 then substituted “any person, at any time after the expiry of six years” for “a person resident in India, at any time after the expiry of seven years”, and inserted the word “first” before “proviso to sub-section (3) of section 200”, both with effect from 1 April 2025. So from 1 April 2025 the period is a year shorter but the class of payee it covers is wider. Where the section stops. The Income-tax Act, 2025 takes over from the tax year beginning 1 April 2026, and its consequences provision is section 398. The Department's own transition FAQ answers the boundary question directly: the Act governing a TDS obligation turns on when the earlier of the event of credit or payment occurs, and where that event falls on or before 31 March 2026 the Income-tax Act, 1961 applies (Q6.1, and Q2.4 to the same effect; Q2.9 adds that the deposit obligation for tax deducted under the 1961 Act before the transition date continues under that Act). So a default on a sum paid or credited up to 31 March 2026 stays with section 201 — the deposit obligation, the interest and the order deeming a person an assessee in default alike — and section 398 governs from the first payment or credit on or after 1 April 2026. Almost every reader holding a section 201 order today is on the older side of that line. It arises in TDS Defaults, Demand, Recovery & Stay and How Tax Law Is Read matters, on section 201, section 201(1A), section 201(1), section 201(1) first proviso, section 201(3), section 201(2), section Rule 31ACB, section Form 26A, section 200(3), section 276B, section 40(a)(ia), section 40(a)(i), section 119, section 221, section 192(1A), section 288(2), section 153, section 398 (Act of 2025) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Identify which failure you are charged with: not deducting at all, or deducting and not paying. Almost every defence in the section turns on that distinction. If the charge is non-deduction, work the first proviso to section 201(1) as four conditions, not three. Get the payee's return under section 139, proof that the sum was taken into account in computing income in that return, proof that the tax due on the income declared was paid, and then the accountant's certificate in Form 26A under rule 31ACB. Without the certificate the proviso does not operate. Do not try the first proviso if you deducted and did not pay. It is worded only for a person who “fails to deduct”, and the Form 26A route is not open to you. Recompute the interest yourself, clause by clause. One per cent a month or part from deductibility to deduction under clause (i); one and one-half per cent a month or part from deduction to payment under clause (ii). Check that the officer has not run one rate across the whole period or started clause (ii) from a due date instead of the date of deduction. If the first proviso to section 201(1) applies to you, insist on the first proviso to section 201(1A): only the one per cent runs, and it stops on the date the payee furnished his return — not on the date you produced Form 26A and not on the date of the order. If the one and one-half per cent interest under section 201(1A)(ii) arose because a payment you initiated on time failed to reach the Government, apply for waiver under Circular No. 5/2025 dated 28 March 2025, which is an order under section 119: the CCIT, DGIT or Pr. CCIT may reduce or waive that interest where the amount was debited from your bank account on or before the due date but could not be credited to the Central Government before the due date because of technical problems beyond your control. Read the ground narrowly — it is a failed-remittance route, not a general hardship waiver, and it reaches only the clause (ii) interest. The application must be made within one year from the end of the financial year for which the interest is charged, the order is to be passed within six months from the end of the month in which the application is received, and it is final. Circular No. 8/2025 dated 1 July 2025 confirms that interest charged before 28 March 2025 can still be applied for, subject to that same one-year deadline. Check the limitation in section 201(3) against the financial year of payment or credit. For an order made on or after 1 April 2025 the outer figure is six years; before that it was seven, and before 1 October 2014 the structure was two years from the end of the financial year in which the statement was filed, or six years where none was filed. Then check the second limb, because it can reopen a closed year: two years from the end of the financial year in which a correction statement was delivered under the first proviso to section 200(3), whichever is later. Establish when your last correction statement went in before arguing the period is over. If the payee is a non-resident and the year is old, check whether section 201(3) covered that order at all before 1 April 2025 — until then the sub-section spoke only of a failure to deduct “from a person resident in India”. If the notice threatens penalty under section 221, point to the second proviso to section 201(1): the Assessing Officer must be satisfied that you failed without good and sufficient reasons, and he must say so. If prosecution under section 276B is in the air, check the date you actually paid the tax deducted at source against the time prescribed for filing the statement under section 200(3); from 1 October 2024 payment by that time takes the section off. The proviso covers only the clause (a) payment — tax deducted under Chapter XVII-B — and not the clause (b) limbs, so it is no answer to a charge under those. Carry the same Form 26A finding across to the disallowance: the second proviso to section 40(a)(ia), and the corresponding proviso to section 40(a)(i), deem the tax to have been deducted and paid on the date the payee furnished his return where you are not deemed an assessee in default under the first proviso to section 201(1).
Superseded by amendment. Not superseded in its own terms — the text below is the current text and governs every default on a sum paid or credited up to 31 March 2026 — but the Income-tax Act, 1961 gives way to the Income-tax Act, 2025 from 1 April 2026, and the consequences provision there is section 398. The boundary is in the Department's transition FAQ: the Act that governs turns on when the earlier of credit or payment occurs, and if that is on or before 31 March 2026, the 1961 Act applies (Q6.1, Q2.4, Q2.9). Version relied on: the current text of section 201, which carries the two amendments made by Act No. 15 of 2024 with effect from 1 April 2025. Twenty-one successive texts of the section have been compared, back to 1990, and this is the newest for the 1961 Act. Be warned that reproductions of 'section 201' are in circulation that serve the 2000 text, in which the interest is eighteen per cent a year and there is no sub-section (3); do not cite one of those. Four things are open. The 2024 amending Act is given in the footnotes only as “Act No. 15 of 2024” and is never named there, so this entry does not name it either. The pre-2008 annual interest rates come from a footnote that is internally garbled about the 2003 step, so that step is given without a figure. Circular No. 275/201/95-IT(B) of 29 January 1997, quoted in Hindustan Coca Cola Beverage, has not been obtained in the Board's own words and is reported here only as the Supreme Court reproduced it. And section 398 of the 2025 Act has been read in its own text, where its marginal note is “Consequences of failure to deduct or pay or, collect or pay” and sub-section (1) deems a person who fails to deduct, collect or pay an assessee in default; the correspondence from section 201 is the Department's own. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The statutory text is the current text of section 201, checked word for word against the next most recent, which prints the two 1-4-2025 amendments prospectively. The amendment history is taken from the footnote apparatus on twenty-one successive texts of the section running back to 1990; the footnotes cluster in the way that corroborates them, three at a time for the Finance Act, 2012 insertions and three or four for Act No. 23 of 2019. Form 26A is established three ways: the footnote “See rule 31ACB and Form No. 26A” carried on three texts of the section, rule 31ACB itself, and the notification that inserted the rule and the form. Circulars No. 5/2025 and No. 8/2025 have been read in the Board's own documents, and no secondary reproduction has been relied on for either. The signature block on the copy of Circular 5/2025 is not legible enough to name the signatory, so this entry does not name one. The transition FAQ has been read the same way. Hindustan Coca Cola Beverage was read in full: Civil Appeal No. 3765 of 2007, Kapadia and B. Sudershan Reddy JJ, decided 16 August 2007, appeal allowed and the High Court set aside. The two sentences quoted from it are the Board's own circular as the Court reproduced it, not a headnote. The case is already in the library and is not proposed again. Two cautions about sources. The footnote lists carried on section 40, and on the 2003 text of section 201, contain commercial editorial cross-references; none has been used here and none should be. And material filed under the number of this section is treacherous — some of it prints Finance Acts rather than the Income-tax Act, and some of what is filed as rule 30 is a rule about differential pricing of securities. Check the instrument named at the head of whatever you have before reading a word of it. Rule 30 of the Income-tax Rules, 1962 is cited in the body but deliberately left out of `sections`: the library does not carry that label, and this entry touches the rule in one parenthetical, which is too thin to justify opening a hub for it. One further caution about the two interest rates. The one per cent limb runs from the date the tax was deductible to the date it was deducted, and the one and one-half per cent limb from deduction to actual payment. A deductor who never deducted at all therefore has no clause (ii) exposure, and a computation that charges him one and one-half per cent throughout is charging under the wrong clause. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As the section stands with effect from 1 April 2025, and for a sum paid or credited up to 31 March 2026, section 201 does five separate things, and they do not all reach the same defaulter. Sub-section (1) deems the defaulter an assessee in default in respect of the tax, and it catches three failures: not deducting, not paying, and deducting and then failing to pay. Its first proviso removes that deeming, but only for a person “who fails to deduct” — a person who deducted and kept the money cannot use it at all — and only on four cumulative conditions: the payee has furnished his return under section 139, has taken the sum into account in computing income in that return, has paid the tax due on the income declared in it, and the deductor furnishes a certificate to that effect from an accountant in the prescribed form. The prescribed form is Form 26A, under rule 31ACB of the Income-tax Rules, 1962: the footnote against the words “in such form as may be prescribed” reads, in three successive texts of the section, “See rule 31ACB and Form No. 26A”, and rule 31ACB provides that the certificate from an accountant under the first proviso to sub-section (1) of section 201 shall be furnished in Form 26A to the Director General of Income-tax (Systems) or the person authorised by him. “Accountant” takes the meaning in the Explanation to section 288(2). The second proviso to sub-section (1) is a separate protection and goes only to penalty under section 221, not to tax or interest. Sub-section (1A) charges simple interest and splits it. Clause (i) charges one per cent for every month or part of a month from the date on which the tax was deductible to the date on which it was deducted — the non-deduction period. Clause (ii) charges one and one-half per cent for every month or part of a month from the date on which the tax was deducted to the date on which it was actually paid — the deducted-but-unpaid period. Both are on the amount of the tax, both count a part of a month as a whole month, and neither is proportionate. The interest is to be paid before furnishing the statement under section 200(3). The first proviso to sub-section (1A) deals with the deductor rescued by the first proviso to sub-section (1): he still pays, but only the clause (i) one per cent, and only from the date the tax was deductible to the date of furnishing of return of income by the payee. The second proviso, inserted by Act No. 6 of 2022 with effect from 1 April 2022, provides that where an order is made by the Assessing Officer for the default under sub-section (1), the interest shall be paid in accordance with that order. Sub-section (2) makes the tax and the sub-section (1A) interest a charge upon all the assets of the person or the company, but by its own words only “where the tax has not been paid as aforesaid after it is deducted”. A person who never deducted does not attract the charge. Sub-section (3) limits time, and again only for one of the failures: no order under sub-section (1) “for failure to deduct” may be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which the correction statement is delivered under the first proviso to section 200(3), whichever is later. Sub-section (4) applies section 153(3)(ii) and Explanation 1 to section 153 to that limit. Section 201 states no time limit for an order in respect of tax that was deducted and not paid. What changed and when. Sub-section (1A) was inserted by the Finance Act, 1966, with effect from 1 April 1966 and charged a flat annual rate: six per cent, then nine from 1 October 1967 (Taxation Laws (Amendment) Act, 1967), twelve from 1 April 1972 (Finance Act, 1972), fifteen from 1 October 1984 (Taxation Laws (Amendment) Act, 1984), eighteen from 1 June 1999 (Finance Act, 1999), fifteen again from 1 June 2001 (Finance Act, 2001), and a further substitution by the Taxation Laws (Amendment) Act, 2003 with retrospective effect from 8 September 2003. Sub-section (1) in its present opening form was substituted by the Finance Act, 2008 with retrospective effect from 1 June 2002. The words “at one per cent for every month or part of a month” were substituted for “twelve per cent per annum” by the Finance Act, 2007 with effect from 1 April 2008 — a single rate, for the whole period from deductibility to payment. The two-rate structure now in force was substituted by the Finance Act, 2010 with effect from 1 July 2010. The first proviso to sub-section (1), the first proviso to sub-section (1A) and the Explanation defining “accountant” were all inserted together by the Finance Act, 2012 with effect from 1 July 2012. Sub-section (3) has moved four times. It was inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010 in two clauses: (i) two years from the end of the financial year in which the statement is filed, where the statement referred to in section 200 has been filed, and (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case. The Finance Act, 2012 substituted “six” for “four” in clause (ii) with retrospective effect from 1 April 2010. The Finance (No. 2) Act, 2014 (Act No. 25 of 2014) substituted the whole sub-section with effect from 1 October 2014, giving a single seven-year limit running from the end of the financial year in which payment is made or credit is given and dropping the statement-filed clause. Act No. 23 of 2019 inserted, with effect from 1 September 2019, the alternative limb “or two years from the end of the financial year in which the correction statement is delivered under the proviso to sub-section (3) of section 200, whichever is later”, and in the same Act and on the same date substituted “payee” for “resident” in the first proviso to sub-section (1) and in the proviso to sub-section (1A), which is what opened the first proviso to non-resident payees. Act No. 15 of 2024 then substituted “any person, at any time after the expiry of six years” for “a person resident in India, at any time after the expiry of seven years”, and inserted the word “first” before “proviso to sub-section (3) of section 200”, both with effect from 1 April 2025. So from 1 April 2025 the period is a year shorter but the class of payee it covers is wider. Where the section stops. The Income-tax Act, 2025 takes over from the tax year beginning 1 April 2026, and its consequences provision is section 398. The Department's own transition FAQ answers the boundary question directly: the Act governing a TDS obligation turns on when the earlier of the event of credit or payment occurs, and where that event falls on or before 31 March 2026 the Income-tax Act, 1961 applies (Q6.1, and Q2.4 to the same effect; Q2.9 adds that the deposit obligation for tax deducted under the 1961 Act before the transition date continues under that Act). So a default on a sum paid or credited up to 31 March 2026 stays with section 201 — the deposit obligation, the interest and the order deeming a person an assessee in default alike — and section 398 governs from the first payment or credit on or after 1 April 2026. Almost every reader holding a section 201 order today is on the older side of that line.
TaxSphere, “Statutory position — s.201: who is deemed an assessee in default, the Form 26A escape that covers non-deduction only, one per cent and one and one-half per cent for two different periods, and the six-year limit from 1 April 2025”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-201-assessee-in-default-the-form-26a-escape-and-the-two-interest-rates/ (validity last checked 2026-09-23)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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My payee refuses to sign the accountant's certificate for Form 26A. Can I get a writ compelling him to issue it?
In March 2026 I remitted a fee to a company outside India without deducting anything, because I did not think any part of it was taxable here. The Assessing Officer now says section 195 obliged me to deduct on the whole remittance, or at least to apply to him before paying. Does section 195 say that — and since the new Act has come in, which Act governs my payment at all?
I failed to deduct TDS and the department has raised a demand on me for the tax itself plus surcharge under section 201. Can it do that?
I never filed Form 26A, but my payee did include the amount in its return and pay tax. Is the s.40(a)(ia) disallowance still good?
