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CS Executive · Tax Laws and Practice · Direct Tax at a Glance

Ravi Textiles Pvt Ltd paid Mr. Arun Sharma an amount on which tax was deductible at source. The payer deducted tax on only part of that income. Under the Income-tax Act, 2025, the bar against direct demand on the assessee operates:

The bar against direct demand applies only to the extent tax has actually been deducted from the income. For the portion on which no tax was deducted, the assessee remains directly liable, so the protection is proportionate and not total.

  1. AFully, so the assessee can never be asked to pay any tax on that income
  2. BNot at all, because the deductor defaulted partly
  3. COnly to the extent to which tax has actually been deducted from that incomeCorrect
  4. DOnly if the deductor also deposits the tax late with interest

Explanation

Section 401 provides that where tax is deductible at source, the assessee shall not be called upon to pay tax himself to the extent tax has been deducted from that income. Hence the protection is limited to the amount actually deducted; the undeducted part can be demanded directly.

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