Section 416 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.
Section 416 lists the modes of recovery other than the Tax Recovery Officer's certificate in section 413. They are recovery from salary, from money due to or held for the assessee by a third person, from money in the custody of a court, and by distraint and sale of movable property. This article follows the text as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. If you have received a recovery notice, see our legal dispute resolution service.
The Assessing Officer (where no certificate has been drawn up) or the Tax Recovery Officer (where one has) may recover tax by requiring an employer to deduct arrears from salary, by notice to any person who owes or holds money for the assessee, by applying to a court holding the assessee's money, or by distraint and sale of movable property if authorised by an officer not below the rank of Commissioner. The third person must comply or be treated as an assessee in default.
Who can use these modes (sub-sections (1) and (2))
Sub-section (1): where no certificate has been drawn up under section 413, the Assessing Officer may recover the tax by any one or more of the modes in section 416.
Sub-section (2): where a certificate has been drawn up under section 413, the Tax Recovery Officer may, without prejudice to the modes in section 413, recover by any one or more of the modes in section 416.
So the modes are available whether or not a certificate exists. The certificate route is explained in our article on sections 412 to 415.
Salary (sub-sections (3) and (4))
If the assessee receives any income chargeable under the head "Salaries", the Assessing Officer or Tax Recovery Officer may require any person paying it to deduct from any payment subsequent to the date of the requisition any arrears of tax due from the assessee. The person must comply and pay the sum so deducted to the credit of the Central Government or as the Board directs.
The requisition does not apply to any part of the salary exempted from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908) (sub-section (4)). That Act is named as printed; check it for the exempt portion.
Example (amounts assumed). Arrears of Rs. 90,000 are due from Gaurav, an employee. The Assessing Officer sends his employer a requisition. The employer deducts from salary payments after the requisition, excluding any portion exempt from attachment under the Code of Civil Procedure, and pays the sums to the Central Government. Payments made before the requisition date are not caught.
Notice to a person who owes or holds money (sub-section (5))
This is the longest part of the section, in clauses (a) to (l).
| Clause | Rule |
|---|---|
| (a) | By notice in writing, the Assessing Officer or Tax Recovery Officer may at any time require any person (I) from whom money is due or may become due to the assessee, or (II) who holds or may subsequently hold money for or on account of the assessee, to pay (i) forthwith upon the money becoming due or being held, or (ii) at or within the time specified in the notice (not being before the money becomes due or is held), so much of the money as is sufficient to pay the arrears, or the whole of it where it is equal to or less than the arrears |
| (b) | The notice may be issued to any person who holds or may subsequently hold money for the assessee jointly with any other person |
| (c) | For such a notice, the shares of joint holders in the account are presumed to be equal until the contrary is proved |
| (d) | A copy of the notice goes to (i) the assessee and (ii) in a joint account, all the joint holders, at their last known addresses |
| (e) | Every person to whom a notice is issued is bound to comply; where it is issued to a post office, banking company or insurer, no pass book, deposit receipt, policy or other document need be produced for any entry or endorsement before payment, irrespective of any rule, practice or requirement to the contrary |
| (f) | Any claim respecting property in relation to which a notice has been issued, arising after the date of the notice, is void against any demand in the notice |
| (g) | A person who objects by a statement on oath that (a) the sum demanded or any part is not due to the assessee, or (b) he holds no money for or on account of the assessee, is not required to pay |
| (h) | If the statement under (g) is discovered to be false in any material particular, the person is personally liable to the extent of his own liability to the assessee on the date of the notice, or the assessee's liability for any sum due under the Act, whichever is less |
| (i) | The officer may amend or revoke the notice, or extend the time for payment, at any time |
| (j) | The officer shall grant a receipt for any amount paid, and the payer is fully discharged from his liability to the assessee to the extent paid |
| (k) | A person who discharges any liability to the assessee after receipt of the notice is personally liable to the officer to the extent of his own liability so discharged, or the assessee's liability for any sum due under the Act, whichever is less |
| (l) | If the person fails to pay in pursuance of the notice, (i) he is deemed an assessee in default in respect of the amount in the notice and further proceedings may be taken against him as if it were an arrear of tax due from him, in the manner provided in sections 413 to 415; and (ii) the notice has the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under section 413 |
Points that matter in practice. A bank holding a deposit for the assessee is bound to pay once notice arrives, but the bank may object on oath that it holds nothing for the assessee, and a false objection exposes it to personal liability. A debtor who pays the assessee instead of the officer after receiving the notice is personally liable under clause (k). Joint accounts are covered, with equal shares presumed unless the contrary is proved.
Example (amounts assumed). Arrears due from Hari Traders are Rs. 2,00,000. A notice goes to its customer Lakshmi Stores, which owes Hari Traders Rs. 1,20,000. Under clause (a) Lakshmi Stores must pay the Rs. 1,20,000, being less than the arrears. It receives a receipt under clause (j), which discharges it to Hari Traders to that extent. If instead it paid Hari Traders after receiving the notice, clause (k) makes it personally liable up to Rs. 1,20,000 (its own liability so discharged), a sum less than the Rs. 2,00,000 of arrears.
Money in the custody of a court (sub-section (6))
The Assessing Officer or Tax Recovery Officer may apply to the court in whose custody there is money belonging to the assessee for (a) payment to him of the entire amount; or (b) if it is more than the tax due, an amount sufficient to discharge the tax.
Distraint and sale (sub-section (7))
The Assessing Officer or Tax Recovery Officer may, if authorised by an income-tax authority not below the rank of Commissioner by general or special order, recover any arrears of tax by distraint and sale of the assessee's movable property in the manner as may be prescribed. The manner is left to the Income-tax Rules, 2026; see our rule-wise guides.
Summary of the section
| Mode | Sub-section | Needs authorisation or approval? |
|---|---|---|
| Deduction from salary | (3), (4) | The text does not mention one |
| Notice to debtor, bank or holder of money | (5) | The text does not mention one |
| Application to a court holding the assessee's money | (6) | The text does not mention one |
| Distraint and sale of movable property | (7) | Yes: a general or special order of an authority not below the rank of Commissioner |
Related provisions
Section 421 keeps the right to recover by suit or under other law alongside these modes; see our article on sections 420 to 422. Where a debtor or bank defaults under a notice, the proceedings follow the machinery in sections 413 to 415 as clause (l) says. For the whole Chapter see the Chapter XIX guide.
Need help responding to a recovery notice?
A notice to a bank, a debtor or an employer can block money quickly and has its own safeguards, such as the objection on oath and the receipt. Our legal dispute resolution team advises assessees and third parties on the response and the underlying demand.
Key takeaways
- The modes in section 416 are open to the Assessing Officer where no certificate exists and to the Tax Recovery Officer where one does.
- An employer can be required to deduct arrears from salary paid after the requisition, subject to the civil-court attachment exemption.
- A notice can be sent to anyone who owes or holds money for the assessee, including a bank or an insurer, and to joint holders.
- A person who objects on oath that he owes or holds nothing is not required to pay, but a false statement makes him personally liable.
- Failing to comply makes the third person an assessee in default.
- Distraint and sale needs an authorisation from an officer not below the rank of Commissioner.
Read next
- Sections 412 to 415: penalty when tax is in default and the recovery certificate
- Sections 417 to 419: recovery through State Government, foreign agreements and other sums
- Section 411: when tax is payable and when an assessee is deemed in default
- Chapter XIX: collection and recovery of tax
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.