Payment of income and deduction of tax
196. (1) For the purposes of section 195, the payment of income shall be deemed to have been made, if the amount payable has been settled-
(a) in cash;
(b) by issue of a cheque or draft;
(c) by credit to any account, whether called "Suspense account" or by any other name; or
(d) by any other mode as may be prescribed.
(2) The deductor shall, before making the payment of income, ensure that the tax deductible in respect of the income has been paid, if the payment is wholly, or partly, in kind.
(3) The deductor may, at the time of making any deduction of tax from the income liable to be taxed under the head "Income from employment", increase or reduce the amount to be deducted from a deductee for the purposes of adjusting any deficiency, or excess, arising out of any previous deduction or non-deduction during the financial year in respect of such deductee.
(4) For the purposes of deduction of tax, the income shall be increased to such amount as would, after deduction of tax thereon at the rates specified in the Third Schedule or the Fourth Schedule, be equal to the net amount payable under an agreement, or any other arrangement, if the tax chargeable on any income is to be borne by the deductor in pursuance to such agreement or arrangement.
