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

Under section 401 of the Income-tax Act, 2025, where tax is deductible at source, what is the position regarding direct demand on the assessee?

The assessee cannot be called upon to pay the tax himself to the extent tax has already been deducted at source from that income. The bar is limited to the deducted amount; the income is not exempt, and any undeducted balance may still be demanded.

  1. AThe assessee can be asked to pay the whole tax again directly
  2. BThe assessee cannot be called upon to pay tax himself to the extent tax has been deducted from that incomeCorrect
  3. CThe assessee is exempt from tax on that income altogether
  4. DDirect demand is barred only if the deductor files a return

Explanation

Section 401 bars a direct demand on the assessee only to the extent that tax has been deducted from the income. It does not exempt the income, and it does not require any filing by the deductor as a condition. Tax not deducted can still be recovered directly under section 391.

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