Chapter XXII - Offences and Prosecution
Section 486
Section 486: punishment not to be imposed in certain cases
Section 486 provides a reasonable-cause defence, but only against the offences in sections 476 and 477 - which deal with failure to pay tax deducted or collected at source to the credit of the Central Government.
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Need advice on Section 486?
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
No person shall be punishable for any failure referred to in section 476 or 477, irrespective of anything contained in that section, if he proves that there was reasonable cause for such failure.
Introduction
Section 486 is a narrow reasonable-cause rule for the failures identified in sections 476 and 477. It can prevent punishment when the person proves a reasonable cause for the particular failure.
It does not say that every prosecution offence has the same defence. The first question is whether the alleged failure is within one of the two named sections.
Key takeaways
Two named failures
The section is tied to failures referred to in sections 476 and 477.
Proof rests on the person
The person must prove reasonable cause for the failure.
No automatic immunity
The defence depends on the specific failure and the evidence of reasonable cause.
What Section 486 says
"No person shall be punishable for any failure referred to in section 476 or 477, irrespective of anything contained in that section, if he proves that there was reasonable cause for such failure."
Scope of the defence
This defence is limited to the failures described in section 476 (failure to pay tax deducted at source, or tax on certain online-gaming winnings/virtual digital asset consideration, to the credit of the Central Government) and section 477 (failure to pay tax collected at source to the credit of the Central Government). It does not extend to other offences in this Chapter.
Applying Section 486 in practice
Exact scope. A person is not punishable for failure under section 476 or 477 if reasonable cause is proved. This section does not list sections 480–483 and should not be described as a blanket defence to all tax offences.
Step-by-step flow for applying Section 486
- 1
Is the failure one referred to in Section 476 or Section 477?
Section 486 covers only non-payment of deducted tax or specified tax (Section 476) and non-payment of collected tax (Section 477).
- No: Section 486 does not apply.
- Yes: Go to the next step.
- 2
Has the person shown the cause for the failure?
The burden is on the person: he must prove reasonable cause.
- 3
Does the court accept it as reasonable cause?
The Act does not define reasonable cause or list examples; it is decided on the facts.
- Yes: Not punishable for that failure, irrespective of anything in Section 476 or 477.
- No: The tiers in Section 476 or 477 apply, subject to the exception in subsection (2) of each.
- 4
Keep records
Because the person must prove the cause, keep contemporaneous records of the event that prevented payment and of when payment was finally made.
Practical checklist
Do
- Identify the precise alleged failure and the linked section, 476 or 477.
- Preserve the documents and timeline supporting the claimed reasonable cause.
- confirm the charge is section 476 or 477, identify the failure period, assemble evidence of cause and prompt remedial action.
Avoid
- Do not assume the defence extends to every offence in the chapter.
Illustrative example
Worked example: TDS not deposited during an account freeze
Hypothetical facts (illustration only, not a real taxpayer): A firm deducted tax at source of ₹11,00,000 (assumed figure). Before the time prescribed for filing the statement under section 397(3)(b), its only bank account was frozen by an order outside its control, and it paid the tax as soon as the freeze was lifted. It kept copies of the order and its bank correspondence.
Coverage
The late payment is a failure referred to in Section 476(1)(a), and payment was after the time in Section 476(2).
Without Section 486
₹11,00,000 exceeds ₹10 lakh but not ₹50 lakh, so Section 476(1)(ii) would apply.
Defence
The firm relies on the freeze as reasonable cause and supports it with its records.
Decision
Whether the cause is reasonable is for the court on the evidence. If it is accepted, the firm is not punishable under Section 476.
Outcome
- Section 486 can displace the Section 476 tier only if reasonable cause is proved.
- It does not apply to offences outside Sections 476 and 477, such as Section 478.
Glossary
- Reasonable cause
- The defence a person must prove to avoid punishment for the specified failures under sections 476 and 477.
- Specified failure
- A failure of the kind referred to in section 476 or 477; this section does not cover all offences.
Frequently asked questions
Which offences does Section 486 provide a defence against?
Only the offences under section 476 and section 477 - both relating to failure to pay tax deducted or collected at source to the credit of the Central Government.
What must a person prove to avoid punishment under Section 486?
That there was reasonable cause for the failure referred to in section 476 or 477.
Is “we intended to pay later” enough?
The statute requires proof of reasonable cause; a bare assertion does not establish it.
Need help applying this provision to your situation?
Talk to our tax team about a TDS/TCS deposit issueLast updated 10 October 2026