Section 201 - Consequences of failure to deduct or pay - Income-tax Act, 1961

Consequences of failure to deduct or pay. 201. 11 [(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: 15 [ 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 19 [ payee ] or on the sum credited to the account of a 19 [ payee ] shall not be deemed to be an assessee in default in respect of such tax if such 19 [ 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: ] 16 [ 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] 5 [ 14 [(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.]] 15 [ 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 20 [ payee ] or on the sum credited to the account of a 20 [ payee ] but is not deemed to be an assessee in default under the first proviso of 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 20 [ payee ] . ] 22 [ 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, 10 [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). 18 [(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 a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given 21 [ 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 ] .] (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).] 15 [ Explanation .-For the purposes of this section, the expression accountant shall have the meaning assigned to it in the Explanations to sub-section (2) of section 288. ] ************* Notes :- 1. Inserted by the Finance Act, 2002, w.e.f. 1-6-2002. 2. Inserted by the Finance Act, 2001, w.r.e.f. 1-4-1962. 3. Substituted for Income-tax by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 4. Substituted for wilfully by the Finance Act, 1966, w.e.f. 1-4-1966. 5. Inserted by the Finance Act, 1966, w.e.f. 1-4-1966. 6. Inserted by the Finance Act, 2001, w.r.e.f. 1-4-1962. 7. Words one per cent for every month or part of a month shall be substituted for twelve per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008. 8. Substituted for fifteen by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003. Earlier fifteen was substituted for eighteen by the Finance Act, 2001, w.e.f. 1-6-2001, eighteen was substituted for fifteen by the Finance Act, 1999, w.e.f. 1-6-1999, fifteen was substituted for twelve by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984, twelve was substituted for nine by the Finance Act, 1972, w.e.f. 1-4-1972 and nine was substituted for six by the Taxation Laws (Amendment) Act, 1967, w.e.f. 1-10-1967. 9. Inserted by the Finance Act, 2006, w.e.f. 1-6-2006. 10. Substituted for it by the Finance Act, 1966, w.e.f. 1-4-1966. 11. Section (1) substituted by Finance Act, 2008, w.e.f. 1.6.2002. Prior to substitution it was read as under: (1) If any such person 1 [referred to in section 200] and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct 2 [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, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax : Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the 3 [Assessing] Officer is satisfied that such person or principal officer or company, as the case may be, has 4 [without good and sufficient reasons] failed to deduct and pay the tax. 12. Substituted vide Finance (No.2) Act, 2009, w.e.f. 1-10-2009, before it was read as, the quarterly statement for each quarter 13. Inserted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2010 14. Sub-section (1A) has been substituted vide Finance Act, 2010 with effect from the 1st day of July, 2010, before this it was read as (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 6 [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 at 7 [ 8 [ twelve ] per cent per annum ] on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid 9 [and such interest shall be paid before furnishing 12 [the statement] for each quarter in accordance with the provisions of sub-section (3) of section 200 15. Inserted vide Finance Act, 2012, w.e.f. 01-07-2012. 16. Substituted vide Finance Act, 2012, w.e.f. 01-07-2012., before it was read as:- Provided that 17. Substituted vide Finance Act, 2012, w.e.f. 01-04-2010., before it was read as:- four years 18. Substituted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of October, 2014, before it was read as, 13 [(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 a person resident in India, at any time after the expiry of- (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) 17 [ six years ] from the end of the financial year in which payment is made or credit is given, in any other case: Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. 19. Substituted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-09-2019 before it was read as resident 20. Substituted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-09-2019 before it was read as resident 21. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-09-2019 22. Inserted vide Finance Act, 2022 w.e.f. 01-04-2022