Section 390 Income Tax Act 2025: How Are TDS, TCS and Advance Tax Credited?
Section 390 provides the foundation for collecting income-tax through tax deducted at source (TDS), tax collected at source (TCS), advance tax and certain payments made by an employer. It also addresses the timing of these payments and how credit is recognised for tax paid to the Central Government.
Chapter: XIX - Collection and recovery of tax, Part A - General.
Law: Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026.
Official statutory source: Income Tax Department - amended Act (PDF).
What does Section 390 provide?
Section 390 is the general gateway provision for payment and recovery of tax under Chapter XIX. It does not, by itself, specify every applicable TDS or TCS rate, threshold or due date. Those details depend on the relevant provisions and rules. It also does not replace the charging provision in Section 4(1).
The provision recognises tax payments made during the tax year even where the assessment is completed in a later tax year, and enables tax credit for specified payments made to the Central Government.
Section 390 explained: All six subsections
| Provision | Statutory effect | Practical significance |
|---|---|---|
| 390(1) | Tax is payable by deduction or collection at source, advance payment, or payment under Section 392(2)(a). | Identifies recognised methods of paying tax under the Chapter. |
| 390(2) | These payment mechanisms apply even if the assessment of the income occurs in a later tax year. | Assessment need not be completed before tax is deducted, collected or paid. |
| 390(3) | Section 390 does not affect the charge of income-tax under Section 4(1). | Payment machinery and the legal charge to tax are distinct. |
| 390(4) | Payment under subsection (1) is additional to other tax-recovery modes for assessed income. | TDS/TCS does not eliminate other lawful recovery powers. |
| 390(5) | Amounts deducted, collected or paid under Section 392(2)(a) and deposited with the Central Government are treated as tax paid on behalf of the specified person. | Establishes the basis for recognising credit of deposited tax. |
| 390(6) | The Board may make rules about who receives credit, including another person, and the tax year for credit. | Credit allocation depends on applicable rules, not merely on possession of a deduction certificate. |
Section 390(1): Recognised payment mechanisms
The Act expressly lists (a) deduction or collection at source; (b) advance payment; and (c) payment under Section 392(2)(a). The last provision concerns an employer's option to pay tax on all or part of a non-monetary perquisite without deducting it from the employee's income, subject to its statutory conditions.
Sections 390(2) to 390(4): Timing, charge and recovery
Payment under Chapter XIX may precede a later assessment. The substantive charge to tax remains governed by Section 4(1). Other lawful recovery mechanisms remain available for assessed liabilities; the actual amount recoverable must account for valid payments and credits.
Sections 390(5) and 390(6): Credit for tax paid
Where tax deducted or collected, or an employer's payment under Section 392(2)(a), is paid to the Central Government, Section 390(5) treats it as payment of tax on behalf of the relevant person. Under Section 390(6), the Board may prescribe rules allocating credit to that person or, where authorised, another person, and determining the tax year for the credit.
How does credit for TDS, TCS or employer-paid tax work?
- Identify the underlying income or transaction. Determine whether tax deduction, collection or an employer's non-monetary perquisite payment applies.
- Confirm deposit. Section 390(5) refers to tax paid to the Central Government.
- Identify the entitled person and tax year. Apply the credit rules made under Section 390(6).
- Reconcile records. Check relevant tax statements, certificates and return disclosures for consistency.
- Account for remaining liability. The recognised payment is considered alongside the final tax liability and other lawful payments or recoveries.
Important distinction: Section 390(5) expressly addresses credit for tax deducted, collected or paid under Section 392(2)(a). Advance tax is listed as a payment mode in Section 390(1), but it should not be inaccurately described as falling within the exact wording of Section 390(5).
Relevant statutory and practical definitions
- Tax deducted at source (TDS)
- Income-tax withheld by a person responsible for a specified payment under the applicable deduction provisions, including Sections 392 and 393.
- Tax collected at source (TCS)
- Income-tax collected by a specified person in relation to prescribed receipts or transactions, including those governed by Section 394.
- Advance tax
- Tax paid before completion of assessment in accordance with the applicable advance-tax provisions.
- Non-monetary perquisite
- A taxable employment benefit provided otherwise than in money, for which Section 392(2)(a) may permit an employer to pay the tax directly.
- Board
- The Central Board of Direct Taxes, which may make rules for tax-credit allocation under Section 390(6).
- Tax year
- The relevant period under the Income-tax Act, 2025, for computing income and applying tax provisions; the year for credit is governed by applicable rules.
These explanations are provided for understanding Section 390; the precise statutory meaning of a defined expression is controlled by the Act and relevant rules.
Practical illustrations
Example 1: Tax deducted from professional fees
A payer deducts tax from a qualifying professional fee and deposits it with the Central Government. Section 390(5) provides the basis for treating the deposited amount as tax paid on behalf of the person from whose income it was deducted, subject to the applicable credit rules.
Example 2: Assessment completed later
An employee's salary tax is deducted during a tax year, but the assessment is completed in a subsequent tax year. Under Section 390(2), the earlier deduction remains a recognised tax-payment mechanism notwithstanding the later assessment.
Example 3: Employer pays tax on a non-monetary benefit
An eligible employer chooses the option under Section 392(2)(a) for a taxable non-monetary perquisite and deposits the tax. Section 390(5) addresses recognition of the payment on behalf of the person whose income is involved, subject to the credit rules.
Frequently asked questions
Does Section 390 impose a separate tax?
No. Section 390 establishes payment and credit mechanisms; the underlying charge of income-tax remains under Section 4(1).
Is TDS or TCS payable before assessment?
Yes. Section 390(2) applies even where assessment of the income is made in a later tax year.
Who receives credit for tax deducted or collected?
Under Section 390(5), amounts paid to the Central Government are treated as tax paid on behalf of the relevant person, subject to the credit rules permitted by Section 390(6).
Does deduction at source prevent other recovery methods?
No. Section 390(4) expressly preserves other recovery modes for assessed tax liabilities.
Does Section 390 prescribe every TDS rate or threshold?
No. Specific deduction, collection, payment and reporting requirements are set out in other provisions of Chapter XIX and applicable rules.
Editorial note: This article explains Section 390 and does not replace checking the relevant payment, withholding, credit and return-filing rules for the transaction and tax year concerned.