Chapter XX - Refunds
Section 434
Section 434: refund for denying liability to deduct tax in certain cases
Section 434 covers a specific situation: where, under a written agreement, the person paying certain income has agreed to bear the tax deductible on it, has already deposited that tax with the Government, but now claims no tax was actually required to be deducted. It lets that person apply for a refund within a strict 30-day window.
On this page
Need advice on Section 434?
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) Where,— (a) under an agreement or other arrangement, in writing, the tax deductible on any income, other than interest in section 393(2) (Table: Sl. No. 17), is to be borne by the person by whom the income is payable; and (b) such person having paid such tax to the credit of the Central Government claims that no tax was required to be deducted on such income, he may, within thirty days from the date of payment of such tax, file an application before the Assessing Officer for refund of such tax in such form and such manner, as may be prescribed.
(2) The Assessing Officer shall, by an order in writing, allow or reject the application as referred to in sub-section (1).
(3) No application under sub-section (1) shall be rejected unless an opportunity of being heard has been given to the applicant.
(4) The Assessing Officer may, before passing an order under sub-section (2), make such inquiry as he considers necessary.
(5) The order under sub-section (2) shall be passed within six months from the end of the month in which application under sub-section (1) is received.
Introduction
Section 434 gives a payer a refund-application route where a written arrangement made the payer bear tax deducted from specified income, the payer deposited the tax, and then claims no deduction was required.
The application must be made within thirty days from payment. The Assessing Officer decides by written order, must hear the applicant before rejection and has a six-month period measured from the end of the application-receipt month.
Key takeaways
Written arrangement required
The payer must have agreed in writing to bear the tax on the covered income.
Thirty-day application
The clock starts from payment of the tax to the Central Government.
Right to be heard
The Assessing Officer cannot reject without giving the applicant an opportunity to be heard.
Six-month decision period
The order is due within six months from the end of the month of application receipt.
Who can apply, and the 30-day window - Section 434(1)
"Where-- (a) under an agreement or other arrangement, in writing, the tax deductible on any income, other than interest in section 393(2) (Table: Sl. No. 17), is to be borne by the person by whom the income is payable; and (b) such person having paid such tax to the credit of the Central Government claims that no tax was required to be deducted on such income, he may, within thirty days from the date of payment of such tax, file an application before the Assessing Officer for refund of such tax in such form and such manner, as may be prescribed."
Processing the application - Section 434(2) to (5)
The Assessing Officer must, by an order in writing, allow or reject the application.
The Assessing Officer may, before passing the order, make such inquiry as he considers necessary.
Hearing before rejection
An application cannot be rejected without giving the applicant an opportunity of being heard. Keep the hearing notice and response with the original payment and written agreement.
Decision deadline
The Assessing Officer must make the written allowance or rejection order within six months from the end of the month in which the application was received.
Step-by-step flow for a refund application under Section 434
- 1
Is there a written agreement or arrangement under which the tax deductible on the income is to be borne by the payer?
The income must not be interest referred to in section 393(2) (Table: Sl. No. 17).
- No, or the income is that excluded interest: Section 434 does not apply.
- Yes: Go to the next step.
- 2
Has the payer paid the tax to the credit of the Central Government and does he claim that no tax was required to be deducted?
- No: Section 434 does not apply.
- Yes: Go to the next step.
- 3
Is the application filed within thirty days from the date of payment of the tax?
The application is filed before the Assessing Officer in the prescribed form and manner.
- No: Section 434(1) does not provide for a late application.
- Yes: Go to the next step.
- 4
Assessing Officer's process
The Assessing Officer may make any inquiry he considers necessary (Section 434(4)). He cannot reject the application without giving the applicant an opportunity of being heard (Section 434(3)).
- 5
Order
The Assessing Officer allows or rejects the application by a written order (Section 434(2)), within six months from the end of the month in which the application is received (Section 434(5)).
Practical checklist
Do
- Keep the written agreement, tax-payment proof and evidence of the application date.
- Check the excluded interest category and the prescribed application form and manner.
Avoid
- Do not treat the thirty days as running from discovery of an error rather than tax payment.
Illustrative example
Worked example: a net-of-tax service contract
Hypothetical facts (illustration only, not a real taxpayer): Under a written contract, Alpha Pvt. Ltd. agrees to bear any tax deductible on fees it pays to a service provider. On 10 June 2027 it pays an assumed ₹1,20,000 as tax to the credit of the Central Government. It then concludes that no tax was required to be deducted on the fees, and files an application that the Assessing Officer receives on 5 July 2027.
Coverage
The tax is borne by the payer under a written agreement, and the income is fees, not the interest excluded by section 393(2) (Table: Sl. No. 17).
Time limit
Thirty days from 10 June 2027 ends on 10 July 2027. The application received on 5 July 2027 is within time.
Hearing and inquiry
The Assessing Officer may make inquiries. If he proposes to reject the application, he must first give Alpha an opportunity of being heard.
Deadline for the order
The application is received in July 2027. Six months from the end of July 2027 (31 July 2027) ends on 31 January 2028.
Outcome
- The Assessing Officer must pass a written order allowing or rejecting the ₹1,20,000 refund application by 31 January 2028.
- Whether tax was in fact deductible is decided on the substantive provisions; Section 434 only provides the procedure.
Frequently asked questions
What kind of income does Section 434 cover?
Income (other than the interest covered by Section 393(2), Table Sl. No. 17) where, under a written agreement or arrangement, the payer has agreed to bear the tax deductible on it, and has deposited that tax with the Central Government while claiming no tax was actually required to be deducted.
How long do I have to apply for a refund under Section 434?
Thirty days from the date of payment of the tax to the Central Government.
How quickly must the Assessing Officer decide the application?
Within six months from the end of the month in which the application under Section 434(1) is received, and only after giving the applicant an opportunity of being heard if the application is to be rejected.
Need help applying this provision to your situation?
Get help with a TDS refund claim under Section 434Last updated 9 October 2026