Sections 390 and 391 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 390 and 391 open Chapter XIX of the Income-tax Act, 2025, on collection and recovery of tax. Section 390 lists the ways in which tax on income is payable (deduction or collection at source, advance payment, and a special payment by an employer), and treats tax paid at source as paid on behalf of the person concerned. Section 391 says when the assessee himself must pay tax directly. This article reads both as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
Under section 390, tax on income is payable by deduction or collection at source, by advance payment, or by payment under section 392(2)(a), whatever the year of assessment, and in addition to other recovery modes. Tax deducted, collected or paid is treated as payment on behalf of the person whose income it is. Under section 391, the assessee must pay directly if the Chapter has no provision to deduct on that income, or tax has not been deducted. A person who fails to deduct or pay is deemed an assessee in default where the assessee has also failed to pay.
Where these sections sit
Sections 390 and 391 form part A, "General", of Chapter XIX. Part B starts at section 392 (salary): see our post on section 392, and the main Table of deduction in section 393. The Chapter is summarised in the Chapter XIX guide. For the earlier Act's provisions see our note on where the earlier Act's TDS sections sit in the 2025 Act: mapping note. Later amendments, rules and notifications should be checked.
For help with deduction and payment of tax at source, see our page on TDS compliance.
Section 390: the modes of payment
Sub-section (1)
The tax on income is payable as per this Chapter by way of:
| Clause | Mode |
|---|---|
| (a) | Deduction or collection at source |
| (b) | Advance payment |
| (c) | Payment under section 392(2)(a) (the employer's option to pay tax on a non-monetary perquisite without deduction) |
Sub-sections (2) to (4)
- (2) The tax is payable as per the Chapter irrespective of the fact that the assessment in respect of the income is to be made in a later tax year.
- (3) Nothing in the section affects the charge of tax on such income under section 4(1). See our post on the charging section.
- (4) The payment of tax under sub-section (1) is in addition to any other mode of tax recovery to discharge the liability in respect of income assessed for a tax year.
Sub-section (5): paid on behalf of the person
Tax deducted at source or collected at source, or the sum referred to in section 392(2)(a), under this Chapter and paid to the Central Government, is treated as payment of tax on behalf of the person:
- (a) from whose income the tax has been deducted; or
- (b) from whom the tax has been collected; or
- (c) in respect of whose income the tax has been paid.
Sub-section (6): credit rules
The Board may make rules for (a) giving credit of tax deducted, collected or paid to a person referred to in sub-section (5) and also to a person other than that person; and (b) the tax year for which the credit may be given. The detail is left to the Income-tax Rules, 2026; see our rule-wise guides.
Section 391: direct payment
Sub-section (1): when the assessee pays
Income-tax on any income is 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.
Sub-section (2): eligible start-up
If an assessee has income of the nature specified in section 17(1)(d), and the specified security or sweat equity shares are allotted or transferred, directly or indirectly, by the current employer which is an eligible start-up referred to in section 140, then the direct payment of tax for sub-section (1) is made in accordance with section 289(3). See our post on perquisites (section 17); this article does not set out the time in section 289(3).
Sub-section (3): deemed assessee in default
Where any person, including the principal officer of the company:
- (a) who is required to deduct any sum as per the 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, and the assessee has also failed to pay such tax directly, then that 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.
Both conditions must be met: the deductor's failure and the assessee's failure to pay directly. See our post on section 398 (default in deduction) and on prosecution for TDS default.
How the two sections work together
Think of section 390 as the map of payment routes and section 391 as the safety net. If the payer deducts correctly and pays to the Central Government, the payee gets credit under section 390(5) and the Rules. If there is no provision to deduct, or tax was not deducted, section 391(1) puts the payment on the assessee. And if the person who should have deducted fails, and the assessee also does not pay, section 391(3) makes the deductor (or the employer opting under section 392(2)(a)) an assessee in default.
The text does not set out the interest, penalty or prosecution for default in these two sections; those are in other provisions of the Act.
Worked example
Sharma and Sons (an invented firm) rents out a godown to Bhatia Logistics Private Limited (an invented company) for a monthly rent. Suppose the Table in section 393 requires Bhatia Logistics to deduct tax on the rent at the time of credit or payment, but Bhatia pays the full rent without deducting. Under section 391(1)(b), the income-tax on that rent has not been deducted as per the Chapter, so it is payable directly by Sharma and Sons.
If Sharma and Sons also does not pay the tax directly, section 391(3) comes in: Bhatia Logistics, which was required to deduct but did not, and the principal officer of the company, are deemed to be assessees in default within the meaning of section 398(1) in respect of the tax, apart from any other consequences. If, instead, Bhatia deducts and pays the tax to the Central Government, section 390(5) treats the payment as made on behalf of Sharma and Sons, from whose income the tax was deducted.
In another situation, Rekha, an employee of a start-up, receives sweat equity shares of the nature in section 17(1)(d) from an eligible start-up referred to in section 140. Section 391(2) says her direct payment of tax is made in accordance with section 289(3).
Need help with deduction at source or direct payment?
If you are unsure whether tax should have been deducted on a payment, or you need to regularise a default, our team can review the position. Please contact us through the page for TDS compliance.
Key takeaways
- Section 390 lists three modes: deduction or collection at source, advance payment, and payment under section 392(2)(a).
- Tax is payable irrespective of assessment in a later tax year, and without affecting the charge under section 4(1).
- Tax deducted or collected and paid is treated as paid on behalf of the person whose income or payment it relates to.
- Section 391 makes the assessee pay directly where there is no provision to deduct or tax was not deducted.
- A defaulting deductor is deemed an assessee in default if the assessee has also not paid directly.
Read next
- Section 392: tax deduction from salary
- Section 393: tax to be deducted at source
- Section 393 on rent, commission and property: Table serial numbers 1 to 3
- Section 394: collection of tax at source
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.