Circular No. 141

What it does

Holds that for tax paid by cheque the date of payment is the date the cheque is encashed, not the date it is presented. Paragraph 5 of Circular No. 3 dated 11th February 1969 had said the date of payment is the date the proceeds are realised and credited to the Government account. Assessees claiming interest under section 214 on advance tax paid by cheques encashed in the following financial year had relied on rule 80(1) of the Treasury Rules, under which payment by cheque is deemed made on the date of presentation if the cheque is honoured. The Board answers that rule 81 of the Treasury Rules lets the department that undertakes to accept cheques prescribe overriding conditions, and that the condition in paragraph 5 of the earlier circular was prescribed under that rule; the Law Ministry agrees that a party taking the facility of payment by cheque must conform to the conditions attached to it. The date of encashment is therefore the date of payment. The Board adds that care must be taken to send cheques received to the bank without delay.

Why it was issued

Assessees were claiming interest under section 214 on advance tax paid by cheques that were encashed only in the next financial year, relying on the treasury rule about the date of presentation.

Who it reaches

Assessees paying advance tax by cheque near a due date
Assessees claiming interest under section 214 on excess advance tax
Departmental officers receiving cheques
Assessing Officers computing interest for late advance tax

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.214	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

942. Date of encashment of cheque is the date of payment of tax in terms of rule 81 of Treasury Rules
1. Attention is invited to Board’s Circular No. 3 [F.No. 16/5/69-IT(Coord)], dated 11-2-1969.
2. In para 5 of the above referred circular, it was stated that the date of tax payment would be the date on which the proceeds of the cheque were realised and credited to the Government amount.
3. Instances have come to notice where assessees have claimed interest under section 214 in respect of payments made towards advance tax through cheques which were encashed in the financial year subsequent to the one in which the payment should have been made. They have drawn support from rule 80(1) of the Treasury Rules which says that payment made through a cheque would be deemed to have been made on the date of presentation of the cheque, if it is honoured.
4. The above plea taken by most of the assessees is not correct inasmuch as rule 81 of the Treasury Rules specifically empowers the department, which undertakes to accept cheques from the public, to prescribe any overriding conditions. The condition prescribed in para 5 of Board’s circular letter, referred to above, was prescribed within the meaning of the rule 81 of the Treasury Rules.
5. The opinion of the Law Ministry has been obtained. They too are of the view that the party which takes advantage of the facility of payment by cheque, as contemplated in Board’s circular referred to above, will have to conform to the conditions and limitations prescribed therein which are quite permissible in view of rule 81 of the Treasury Rules. Accordingly, the date of encashment of the cheque will be the date of payment of tax.
6. However, proper care must be exercised to ensure that the cheques so received are sent to the Bank without any delay.

Circular: No. 141 [F. No. 400/2/74-ITCC], dated 23-7-1974.

What to watch

This runs the opposite way from the rule the assessee relies on, and it is the departmental condition under rule 81 that carries the day.
A cheque handed in on the last day of a quarter but cleared later is treated as paid on the later date, with consequences for interest both ways.
The Board's own direction to send cheques to the bank without delay is the assessee's answer where the delay was the office's.
The circular is confined to payment by cheque under the arrangement in Circular No. 3 dated 11th February 1969, and the payment machinery has moved on since.

Where you meet it

In a dispute over interest under section 214 or interest for late advance tax where the cheque was given in one year and cleared in the next.

What it names

Rules it names. Rule 80, 81 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

← Circular No. 142 · Circular No. 140 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is