Section 476
Section 476: failure to pay deducted tax to the government
Section 476 is one of the most serious offences in the Act - it criminalises deducting tax at source (or tax on specified winnings/virtual digital asset payments) and then failing to actually deposit that money with the government. Deducting the tax but keeping it is treated far more seriously than simply failing to deduct it in the first place, since the money was withheld from the payee on the understanding it would go to the government.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
What the section covers
The offence applies where a person fails to:
- Pay to the credit of the Central Government the tax deducted at source by them, as required under Chapter XIX-B; or
- Pay or ensure payment of tax to the credit of the Central Government in respect of income by way of winnings from online games (referred to in Section 393(3), Table Sl. No. 2), excluding winnings wholly in kind; or
- Pay or ensure payment of tax on a sum paid as consideration for transfer of a virtual digital asset (referred to in Section 393(1), Table Sl. No. 8(vi)), excluding consideration wholly in kind.
The punishment, tiered by amount
Under the current text (substituted by the Finance Act, 2026, effective 1 April 2026):
| Amount of tax involved | Punishment |
|---|---|
| Exceeds ₹50,00,000 | Simple imprisonment up to two years, or fine, or both |
| Exceeds ₹10,00,000 but does not exceed ₹50,00,000 | Simple imprisonment up to six months, or fine, or both |
| Any other case | Fine only |
An important carve-out
This section does not apply if the deducted tax has been paid to the credit of the Central Government on or before the time prescribed for filing the TDS statement under Section 397(3)(b) for that payment - in other words, if you're late in filing the statement but the money was actually deposited in time, this offence provision doesn't apply.
Before the Finance Act, 2026 amendment, the punishment was rigorous imprisonment for a term of not less than three months, extendable to seven years, with fine, applying uniformly regardless of the amount involved - the current tiered, generally lighter structure is a significant change from that.
Frequently asked questions
Is failing to deposit TDS a criminal offence?
Yes - Section 476 makes it an offence to deduct tax at source and fail to pay it to the credit of the Central Government, with the punishment tiered by the amount involved.
Is there any way to avoid this offence if I'm late?
Yes - the section does not apply if the deducted tax was actually paid to the government on or before the time prescribed for filing the relevant TDS statement under Section 397(3)(b), even if that filing itself was delayed.
Does this cover crypto/virtual digital asset transactions too?
Yes - it also covers failure to pay tax on winnings from online games and on consideration for transfer of a virtual digital asset, not just conventional TDS deductions.
Related sections
Want this applied to your actual filing, not just explained?
Get help with TDS compliance to avoid this offenceLast updated 9 September 2026