The provisions relating to penalty for failure to deduct tax at source have been restructured under the Income-tax Act, 2025. The earlier Section 271C of the Income-tax Act, 1961 is now covered under Section 448, effective from 1st April, 2026.
The provision continues to impose a penalty where a person fails to deduct tax as required under the Act. While the fundamental objective of the section remains unchanged, references and compliance requirements have been aligned with the new structure of the Income-tax Act, 2025.
Quick Reference – Section Mapping & Penalty Details
- New Section (IT Act 2025): Section 448
- Nature of Provision: Penalty for failure to deduct tax at source
- Earlier Section (IT Act 1961): Section 271C
- Applicable To: Persons responsible for deducting tax at source
- Penalty Amount: Equal to the amount of tax not deducted
- Authority Competent to Impose Penalty: Assessing Officer
Applicability of Penalty under Section 448
Section 448 of the Income Tax Act, 1961, outlines the penalties for failing to deduct or remit Tax Deducted at Source (TDS) as mandated by the Act.
The Supreme Court has clarified that penalties under Section 271C are specifically for failures to deduct tax at source and do not extend to delays in remitting TDS after deduction. In cases where TDS is deducted but remitted late, interest may be charged under Section 398(3)(a)(i), but penalties under Section 448 are not applicable.
Key Provisions of Section 448
- Failure to Deduct or Pay TDS:
- If a person fails to deduct the whole or any part of the tax as, then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which they failed to deduct.
- Penalty Amount:
- The penalty imposed under Section 448 is equivalent to the amount of tax that was not deducted or paid. For instance, if ₹50,000 of TDS was not deducted, the penalty would also be ₹50,000.
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