Chapter XIX - Collection and Recovery of Tax
Section 390
Section 390: how tax is collected - TDS/TCS, advance tax and direct payment
Section 390 opens Chapter XIX, "Collection and Recovery of Tax", of the Income-tax Act, 2025. It sets out the three channels through which tax on income reaches the government ahead of, or alongside, regular assessment - deduction or collection at source (TDS/TCS), advance tax, and the special employer-borne-tax payment under Section 392(2)(a).
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Need advice on Section 390?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) The tax on income shall be payable as per this Chapter by way of— (a) deduction or collection at source; or (b) advance payment; or (c) payment under section 392(2)(a).
(2) The tax referred to in sub-section (1) shall be payable as per the provisions of this Chapter, irrespective of the fact that the assessment in respect of such income is to be made in a later tax year.
(3) Nothing contained in this section, shall affect the charge of tax on such income under section 4(1).
(4) The payment of tax referred to in sub-section (1) shall be in addition to any other mode of tax recovery to discharge the liability in respect of income assessed for a tax year.
(5) The tax deducted at source or collected at source or sum referred to in section 392(2)(a) under this Chapter and paid to the Central Government shall be treated as payment of tax on behalf of the person— (a) from whose income such tax has been deducted; or (b) from whom such tax has been collected; or (c) in respect of whose income such tax has been paid.
(6) The Board may make rules for— (a) giving credit of tax deducted or collected or paid to a person referred to in sub-section (5) and also a person other than the person referred to in the said sub-section; (b) the tax year for which the credit may be given.
Introduction
Section 390 sets out the collection routes for income-tax under Chapter XIX: deduction or collection at source, advance payment, and employer payment for a non-monetary perquisite under section 392(2)(a). These payments can occur before assessment and are credited according to the statutory rules.
Key takeaways
Three routes
The Chapter recognises source deduction or collection, advance payment and the specified employer payment.
Payment before assessment
Tax can be payable under these routes even where assessment occurs in a later tax year.
Credit
Tax paid to the Central Government under the section is treated as payment on behalf of the person identified in subsection (5).
Three modes of collection
Tax on income is payable, as per this Chapter, by way of:
- Deduction or collection at source (TDS/TCS); or
- Advance payment (advance tax); or
- Payment under Section 392(2)(a) - where an employer opts to pay tax on a non-monetary perquisite itself, without deducting it from the employee.
Timing does not depend on the assessment year
This tax is payable under the provisions of this Chapter irrespective of the fact that the assessment for the related income is to be made in a later tax year.
Nothing in this section affects the basic charge of tax on such income under Section 4(1) - Section 390 is a collection mechanism, not a separate charging provision.
Payment of tax under this Chapter is in addition to any other mode of tax recovery used to discharge the liability for income assessed for a tax year.
Credit for tax collected
Tax deducted or collected at source, or a sum paid under Section 392(2)(a), once paid to the Central Government, is treated as payment of tax on behalf of the person from whose income the tax was deducted, from whom it was collected, or in respect of whose income it was paid.
The Board may make rules for giving credit of such tax to that person - and also to a person other than that person - and for the tax year for which such credit may be given.
Step-by-step flow for applying Section 390
- 1
Which route is the tax being paid through?
Section 390(1) lists three routes under Chapter XIX: (a) deduction or collection at source, (b) advance payment, or (c) payment by an employer under Section 392(2)(a).
- 2
Is the assessment of that income to be made in a later tax year?
Under Section 390(2), the tax is still payable now under the Chapter. A later assessment is no reason to delay.
- 3
Where does the charge of tax come from?
Section 390(3) keeps the charge under Section 4(1) unaffected. Section 390 deals with collection, not the charge. Under Section 390(4), these payments are in addition to any other mode of recovery for income assessed for a tax year.
- 4
Has the amount been paid to the Central Government?
Under Section 390(5), tax deducted or collected, or the Section 392(2)(a) sum, once paid to the Central Government, is treated as tax paid on behalf of the person from whose income it was deducted, from whom it was collected, or for whose income it was paid.
- 5
To whom and for which tax year is credit given?
Section 390(6) leaves this to rules made by the Board, including credit to a person other than the person in Section 390(5). Check those rules; Section 390 does not set them out.
Practical checklist
Do
- Classify each income or payment under the applicable TDS, TCS, advance-tax or section 392(2)(a) route before calculating compliance.
- Reconcile amounts paid to the Central Government with the credit available to the correct person and tax year under the rules.
- Check the final assessed liability separately because section 390 preserves the charging rule and other recovery modes.
Avoid
- Do not wait for a later assessment before meeting a current source-tax or advance-payment obligation.
- Do not treat a deduction shown on a statement as credit without checking that the amount was paid to the Central Government as subsection (5) requires.
Illustrative example
Worked example: TDS and advance tax set against the final liability
Hypothetical facts (illustration only, not a real taxpayer): Mr. Sen, a consultant, has a client who deducts tax of ₹30,000 (assumed) from his fees during the tax year. He also pays advance tax of ₹50,000 (assumed) during the year. His tax liability is later assessed at ₹95,000 (assumed).
Identify the routes
The ₹30,000 is deduction at source (Section 390(1)(a)). The ₹50,000 is advance payment (Section 390(1)(b)).
Timing
Both were payable during the year under Section 390(2), even though the assessment comes later.
Treatment as his tax
Once the client pays the ₹30,000 to the Central Government, it is treated as tax paid on Mr. Sen's behalf under Section 390(5)(a). Credit is given under the Board's rules (Section 390(6)).
Balance
Tax already paid = ₹30,000 + ₹50,000 = ₹80,000. Balance on the assessed liability = ₹95,000 − ₹80,000 = ₹15,000; the balance is discharged outside these routes; Section 390(4) keeps other modes available.
Outcome
- ₹80,000 is treated as tax paid on Mr. Sen's behalf, subject to the credit rules.
- The charge itself comes from Section 4(1); Section 390 only governs how the tax is collected.
Glossary
- Tax deducted at source
- Tax withheld by a payer under a relevant deduction provision and paid to the Central Government.
- Tax collected at source
- Tax collected by a collector under an applicable collection provision and paid to the Central Government.
Frequently asked questions
What are the three ways tax can be collected under Chapter XIX?
Deduction or collection at source (TDS/TCS), advance payment of tax, and payment under Section 392(2)(a) where an employer bears tax on a non-monetary perquisite.
Does Section 390 itself create a charge of tax?
No - Section 390(3) makes clear it does not affect the charge of tax on income under Section 4(1); it only deals with how and when tax already chargeable is collected.
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Talk to our team about TDS, TCS and advance tax complianceLast updated 9 October 2026