Direct payment
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 391(1) of Income Tax Act 2025
391(1) The income-tax on any income shall be payable directly by the assessee if—
- (a) there is no provision under this Chapter to deduct income-tax on such income at the time of payment; or
- (b) income-tax has not been deducted as per the provisions of this Chapter.
Section 391(2) of Income Tax Act 2025
391(2) If an assessee has any income of the nature of specified security or sweat equity shares as specified in section 17(1)(d) allotted or transferred directly or indirectly by the current employer which is an eligible start-up referred to in section 140, then direct payment of tax for the purposes of sub-section (1) shall be made within the time specified in section 289(3).
Section 391(3) of Income Tax Act 2025
391(3) Where any person, including the principal officer of the company,––
- (a) who is required to deduct any sum as per the provisions of this Act; or
- (b) referred to in section 392(2)(a), being an employer,
does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, apart from any other consequences that he may incur, be deemed to be an assessee in default within the meaning of section 398(1), in respect of such tax.
FAQs on Section 391 of Income Tax Act 2025
What is meant by direct payment of income tax under Section 391(1)?
Direct payment means that the assessee is personally liable to pay income tax on income where no provision for deduction exists, or where tax has not been deducted as required under the relevant Chapter of the Act.
When is an assessee required to make direct payment of tax?
An assessee must make direct payment if either (a) there is no provision for deduction of income tax on that income under the Chapter, or (b) income tax has not been deducted as required.
Does Section 391 apply even if tax deduction was supposed to happen but didn’t?
Yes, if the payer fails to deduct tax as required, the assessee is still responsible to pay the tax directly.
How is direct payment treated in case of non-deduction by the employer?
If the employer fails to deduct or pay tax and the assessee also fails to pay it directly, both the employer and the assessee may face consequences. The employer may be deemed an assessee in default under Section 398(1).
What is the consequence if tax is neither deducted nor paid by the assessee?
If both the deductor (e.g., employer) and the assessee fail to comply, the deductor may be deemed an assessee in default, apart from other legal consequences.
What if an employee of a start-up receives specified securities or sweat equity shares?
If an assessee receives specified security or sweat equity shares from an eligible start-up employer (as referred in Section 140), then they are liable to make direct tax payment within the time prescribed in Section 289(3).
Who is responsible to pay tax on perquisites received in the form of shares from start-ups?
The employee (assessee) is responsible for paying tax directly, within the specified time, if such shares are allotted or transferred by the employer start-up.
Does Section 391 cover both failure to deduct and failure to pay tax?
Yes, Section 391(3) covers both scenarios—failure to deduct tax as well as failure to pay the deducted tax to the government.
Can a principal officer of a company be held liable under Section 391?
Yes, if the principal officer fails to deduct or pay tax and the assessee has also failed to make direct payment, the officer may be deemed an assessee in default.
What is the link between Section 391(3) and Section 398(1)?
Section 391(3) states that if a person obligated to deduct tax fails to do so, and the assessee also fails to pay, then the person may be deemed an assessee in default under Section 398(1).
Does Section 391 override TDS provisions?
No, it applies only when TDS provisions are absent or not complied with. It does not override TDS rules but complements them by holding the assessee accountable in such cases.
