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CA Final · Direct Tax Laws & International Taxation · Deduction, Collection and Recovery of Tax

Ganesh Traders paid tax of ₹40,000 as tax deducted at source on behalf of Ramesh, from whose income it was deducted. Ramesh's income is assessed in a later tax year. Under section 390 of the Income-tax Act, 2025, how is this tax treated?

The tax is treated as payment on behalf of Ramesh, the person from whose income it was deducted. Section 390 makes the tax payable regardless of later assessment, and it neither affects the charge under section 4(1) nor replaces other recovery modes.

  1. AAs payment of tax on behalf of Ramesh, even though assessment is made in a later tax yearCorrect
  2. BAs payment of tax on behalf of Ganesh Traders, the deductor
  3. CAs payment that replaces the charge of tax under section 4(1)
  4. DAs a payment that excludes any other mode of tax recovery for the assessed income

Explanation

Section 390(5) treats tax deducted and paid to the Central Government as payment on behalf of the person from whose income it was deducted. Section 390(2) says the tax is payable irrespective of later assessment. Sections 390(3) and 390(4) state the charge under section 4(1) is unaffected and recovery modes are additional, so the last two options are wrong.

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