Chapter XXII - Offences and Prosecution
Section 477
Section 477: failure to pay tax collected at source to the government
Section 477 is the Tax Collected at Source (TCS) counterpart to Section 476's TDS offence - it criminalises collecting tax at source and then failing to deposit it with the Central Government.
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Need advice on Section 477?
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) If a person fails to pay the tax collected by him to the credit of the Central Government, as required under section 397(3)(a), he shall be punishable––
(a) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount of such tax exceeds fifty lakh rupees; or
(b) with simple imprisonment for a term up to six months or with fine, or with both, where the amount of such tax exceeds ten lakh rupees but does not exceed fifty lakh rupees; or
(c) with fine, in any other case.
(2) The provisions of this section shall not apply if the payment of the tax collected at source has been made to the credit of the Central Government on or before the time prescribed for filing the statement under section 397(3)(b) in respect of such payment.
Introduction
Section 477 concerns tax collected at source but not paid to the Central Government as section 397(3)(a) requires. The 2026 amended punishment is tiered by unpaid amount, and subsection (2) excludes payment made by the prescribed statement-filing time.
Key takeaways
Collected but not credited
The offence concerns tax already collected at source and not paid as required.
Amount tiers
Above ₹50 lakh, up to two years’ simple imprisonment, fine, or both; above ₹10 lakh through ₹50 lakh, up to six months, fine, or both; otherwise fine.
Statement-time exception
The section does not apply if collected tax is paid by the prescribed section 397(3)(b) statement-filing time.
What the section says
If a person fails to pay the tax collected by them to the credit of the Central Government, as required under Section 397(3)(a), they are punishable 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
The section does not apply if the collected tax was paid to the credit of the Central Government on or before the time prescribed for filing the TCS statement under Section 397(3)(b) for that payment.
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, uniformly regardless of amount - the current tiered structure is a significant change.
Applying Section 477 in practice
Critical distinction. This offence addresses tax *collected* but not paid to the Central Government, unlike section 449's failure to collect. Finance Act 2026 introduces graduated outcomes tied to the tax amount: above ₹50 lakh, above ₹10 lakh through ₹50 lakh, and other cases. Subsection (2) excludes a case where the collected tax reaches the Government by the time prescribed for filing the section 397(3)(b) statement for that payment.
Step-by-step flow for applying Section 477
- 1
Did the person collect tax at source and fail to pay it to the credit of the Central Government as required under section 397(3)(a)?
- No: Section 477 does not apply.
- Yes: Go to the next step.
- 2
Was the collected tax paid on or before the time prescribed for filing the statement under section 397(3)(b) for that payment?
Section 477(2). The time is prescribed; Section 477 does not state it.
- Yes: Section 477 does not apply to that payment.
- No: Go to the next step.
- 3
Can the person prove reasonable cause?
Section 486 also covers failures referred to in Section 477.
- Yes, proved: Not punishable under Section 477.
- No: Go to the next step.
- 4
What is the amount of such tax?
Section 477(1)(a), above ₹50 lakh: simple imprisonment up to two years, or fine, or both. Section 477(1)(b), above ₹10 lakh but not above ₹50 lakh: simple imprisonment up to six months, or fine, or both. Section 477(1)(c), any other case: fine only. The Act does not state the amount of the fine here.
Practical checklist
Do
- Compare collection and Central Government credit dates and amounts.
- Check the applicable section 397(3)(b) statement deadline.
- collection date and amount, statutory remittance, statement due date and actual payment.
Avoid
- Do not use the pre-2026 rigorous-imprisonment description.
Illustrative example
Worked example: TCS collected but not deposited
Hypothetical facts (illustration only, not a real taxpayer): A dealer collected tax at source of ₹4,50,000 from buyers during a quarter (assumed figure). It paid ₹1,50,000 before the time prescribed for filing the statement under section 397(3)(b) and has still not paid the rest. It offers no reasonable cause.
Coverage
Tax was collected and not paid as required under section 397(3)(a), so Section 477(1) is engaged.
Exception
The ₹1,50,000 paid in time is outside the section under Section 477(2). Unpaid balance = ₹4,50,000 − ₹1,50,000 = ₹3,00,000.
Tier
₹3,00,000 does not exceed ₹10 lakh, so this is "any other case" under Section 477(1)(c): fine only.
Defence
Section 486 would apply only if the dealer proved reasonable cause for the failure.
Outcome
- On these assumed facts the dealer is exposed to a fine under Section 477(1)(c) for the ₹3,00,000.
- Had the full ₹4,50,000 been paid before the prescribed statement-filing time, Section 477 would not apply at all.
Frequently asked questions
Is failing to deposit collected TCS a criminal offence?
Yes - Section 477 makes it an offence to collect tax at source and fail to pay it to the credit of the Central Government, with punishment tiered by the amount involved.
Can I avoid this offence if I deposit the tax late but before the statement deadline?
Yes - the section does not apply if the collected tax was actually paid to the government on or before the time prescribed for filing the relevant TCS statement under Section 397(3)(b).
How is this different from Section 476?
Section 476 covers tax deducted at source (TDS) and certain other specified payments; Section 477 is the parallel offence for tax collected at source (TCS) under Section 397(3)(a).
Does late remittance always lead to prosecution?
Test subsection (2) and section 486 reasonable cause, along with the offence facts.
Need help applying this provision to your situation?
Get help with TCS compliance to avoid this offenceLast updated 10 October 2026