Section 199 - Credit for tax deducted at source - Income Tax - Ready Reckoner - Income Tax

Credit for tax deducted at source [ Section 199 ] Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the - person from whose income the deduction was made, or owner of the security, or depositor or owner of property or unit-holder, or shareholder, as the case may be. [ Section 199(1) ] Any sum referred to in section 192(1A) and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. [ Section 199(2) ] The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in section 199(1) and (2) and also the assessment year for which such credit may be given. [ Section 199(3) ] Rule for the purposes of Credit for tax deducted at source for the purposes of section 199 [ Rule 37BA ] Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (i.e. the deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. [ Rule 37BA(1) ] Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in rule 37BA(1). the declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. Keep in safe custody - the deductor shall issue the certificate for decuction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in rule 37BA(1) and shall keep the declaration in his safe custody. [ Rule 37BA(2) ] Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. [ Rule 37BA(3) ] For the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made. [ Rule 37BA(3A) ] Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of - (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority: and (ii) the information in the return of income in respect of the claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board from time to time. [ Rule 37BA(4) ] Important Notification, Circular Instruction Instruction regarding not to put any inconvenience to assessee for Non-deposit of TDS by the deductor [ Instruction No. 275/29/2014-IT-(B) Dated 01.06.2015 ] As per Para 2, As per Section 199 of the Act credit of Tax Deducted at Source is given to the person only if it is paid to the Central Government Account. However, as per Section 205 of the Act the assessee shall not be called upon to pay the tax to the extent tax has been deducted from his income where the tax is deductible at source under the provisions of Chapter- XVII. Thus the Act puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch cannot be enforced coercively. Important Case Laws The assessee did not deposit the withholding tax and, hence, a demand was raised by the respondents/revenue, According to the petitioner, because of the outstanding demand concerning AY 2012-13, the refund payable to him for AY 2015-16 was not paid to him, and instead, set-off against the said demand?. [ Sanjay Sudan Versus The Assistant Commissioner of Income Tax Anr. 2023 (2) TMI 1079 - Delhi High Court ] Admin note - The section 199 read with section 205.