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

Tarini Traders Pvt Ltd deducted tax at source in April 2026 under a provision falling under Chapter XIX-B of the Income-tax Act, 2025 and deposited it with the Central Government. Rohan Mehta is the person from whose income the tax was deducted. As per section 390(5), how is the tax so deducted and paid to be treated?

Tax deducted at source and paid to the Central Government is treated as a payment of tax on behalf of the person from whose income it was deducted, here Rohan Mehta. The deductor only remits it, so the credit belongs to the deductee.

  1. AAs a payment of tax on behalf of Rohan Mehta, from whose income it was deductedCorrect
  2. BAs a payment of tax on behalf of Tarini Traders Pvt Ltd, the deductor
  3. CAs a voluntary deposit that does not count towards any person's tax liability
  4. DAs a payment of tax that is creditable only after the assessment is completed

Explanation

Section 390(5) says tax deducted at source and paid to the Central Government is treated as payment of tax on behalf of the person from whose income it was deducted. The deductor merely acts as a conduit, so treating it as the deductor's own payment is wrong.

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