Recovery of tax in pursuance of agreements with foreign countries
[Section-418 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 418(1) of Income Tax Act 2025
418(1) Where an agreement is entered into by the Central Government with the Government of any country outside India for recovery of income-tax under this Act and the corresponding law in force in that country and the Government of that country or any authority under that Government which is specified in this behalf in such agreement sends to the Board a certificate for the recovery of any tax due under such corresponding law from—
- 418(1)(a) a resident; or
- 418(1)(b) a person having any property in India,
the Board may forward such certificate to any Tax Recovery Officer having jurisdiction over the resident, or within whose jurisdiction such property is situated and thereupon such Tax Recovery Officer shall—
- (i) proceed to recover the amount specified in the certificate in the manner in which he would proceed to recover the amount specified in a certificate drawn up by him under section 413; and
- (ii) remit any sum so recovered by him to the Board after deducting his expenses in connection with the recovery proceedings.
Section 418(2) of Income Tax Act 2025
418(2) Where an assessee is in default or is deemed to be in default in making a payment of tax, the Tax Recovery Officer may,—
- 418(2)(a) if the assessee is a resident of a country being a country with which the Central Government has entered into an agreement for the recovery of income-tax under this Act and the corresponding law in force in that country; or
- 418(2)(b) has any property in that country,
forward to the Board a certificate drawn up by him under section 413 and the Board may take such action thereon as it may deem appropriate having regard to the terms of the agreement with such country.
FAQs on Section 418 of Income Tax Act 2025
What is the purpose of Section 418 of the Income Tax Act, 2025?
Section 418 enables recovery of income tax in India or outside India pursuant to agreements entered into by the Central Government with foreign countries.
Who can initiate recovery under Section 418(1)?
The government or a specified authority of a foreign country that has an agreement with India may send a recovery certificate to the Board for recovering tax due from a resident or a person having property in India.
What does the Board do upon receiving such a certificate under Section 418(1)?
The Board forwards the certificate to a Tax Recovery Officer (TRO) with jurisdiction over the resident or the property located in India.
How does the Tax Recovery Officer recover the tax amount under Section 418(1)?
The TRO recovers the amount as if it were a domestic tax recovery under Section 413, and remits the recovered sum to the Board after deducting expenses.
Who can be targeted for recovery under Section 418(1)?
A person who is either a resident in India or owns property in India, and against whom a foreign country has requested tax recovery.
Can India recover tax from a person residing in a foreign country?
Yes, under Section 418(2), if the person resides in a country with which India has a tax recovery agreement or owns property there.
What actions can the Indian Tax Recovery Officer take under Section 418(2)?
The TRO can forward a certificate drawn under Section 413 to the Board, which may act upon it based on the terms of the agreement with the concerned foreign country.
What is a tax recovery certificate under Section 413?
It is a formal document that initiates the recovery process of tax dues by a Tax Recovery Officer.
Does Section 418(2) apply only if the assessee has defaulted in India?
Yes, it applies where an assessee is in default or deemed to be in default in paying tax under the Income Tax Act, 2025.
Can the Indian government recover foreign tax dues from Indian residents?
Yes, if there is a bilateral agreement permitting such recovery, Section 418(1) enables enforcement of foreign tax recovery requests in India.
What kind of agreements does Section 418 refer to?
Agreements between the Indian Central Government and foreign governments specifically for the purpose of income tax recovery under the respective tax laws.
What does “corresponding law in force” mean in the context of Section 418?
It refers to the income tax law applicable in the foreign country with which India has a tax recovery agreement.
Can a foreign country request tax recovery from a non-resident who owns property in India?
Yes, as per Section 418(1)(b), recovery can be initiated against any person having property in India, even if they are not a resident.
Is the amount recovered by the TRO under Section 418 remitted entirely to the foreign government?
No, the TRO first deducts recovery expenses before remitting the sum to the Board for further action.
Can the Board refuse to act on a recovery certificate received from a foreign country?
The Board is empowered to act upon such certificates under Section 418(1), but it may consider the terms of the agreement while doing so.
Is the process under Section 418 automatic or discretionary?
While the provision provides a framework, the Board and the TRO exercise discretion based on the agreement and specific circumstances.
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