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

Under the Income-tax Act, 2025, Mr. Arvind Rao received an amount from which his payer deducted tax of ₹40,000, being the full tax deductible on that income. The tax computed on that income is ₹40,000. What is the position regarding a direct demand on Mr. Rao for that income?

Mr. Rao cannot be asked to pay the tax himself to the extent of the ₹40,000 already deducted. The Act bars a direct demand on the assessee where tax is deductible at source, to the extent tax has actually been deducted from that income.

  1. AHe can be called upon to pay ₹40,000 again, subject to a later refund claim
  2. BHe can be called upon to pay half the tax, ₹20,000, directly
  3. CHe cannot be called upon to pay the tax himself to the extent of the ₹40,000 deductedCorrect
  4. DHe can be called upon to pay tax directly only if he has filed his return late

Explanation

Section 401 bars a direct demand on the assessee where tax is deductible at source, to the extent tax has been deducted from that income. Since ₹40,000 was deducted against ₹40,000 of tax, no direct demand can be raised. The refund option is wrong because the bar prevents the demand itself.

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