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CMA Intermediate · Direct and Indirect Taxation · Tax Deducted at Source and Tax Collected at Source

A person collected tax at source of Rs. 8,00,000 but did not pay it to the Central Government. Under the Income-tax Act, 2025, what is the position regarding prosecution for failure to pay the collected tax?

The failure is punishable only with fine. Since the uncollected-to-deposit amount of Rs. 8,00,000 does not exceed Rs. 10 lakh, it falls in the residual category. Imprisonment applies only when the tax exceeds Rs. 10 lakh, and the old mandatory rigorous imprisonment has been replaced.

  1. APunishable with fine, being a case where the tax does not exceed Rs. 10 lakhCorrect
  2. BPunishable with simple imprisonment up to six months, or fine, or both
  3. CPunishable with simple imprisonment up to two years, or fine, or both
  4. DPunishable with rigorous imprisonment of at least three months and fine

Explanation

Tax of Rs. 8,00,000 does not exceed Rs. 10 lakh, so it falls in the 'any other case' category, punishable with fine. The six-month imprisonment band needs more than Rs. 10 lakh up to Rs. 50 lakh. The rigorous imprisonment of at least three months was the earlier law, now substituted.

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