Sections 226 and 227 Income Tax Act: Other Modes of Tax Recovery

Sections 226 and 227 of the Income-tax Act, 1961 dealt with additional methods for recovery of tax arrears and recovery through a State Government. From 1 April 2026, the corresponding provisions are sections 416 and 417 of the Income-tax Act, 2025.

Current law: The Income-tax Act, 2025 is in force from 1 April 2026. Section 416 now contains the provisions on other modes of recovery, while section 417 deals with recovery through State Government. The earlier sections remain relevant when examining proceedings and liabilities preserved by the repeal and savings provisions.

Section 226 of the Income-tax Act, 1961 - other modes of recovery

Section 226 provided several recovery mechanisms in addition to recovery through a certificate. Where no certificate had been drawn up under section 222, the Assessing Officer could recover tax through one or more modes specified in section 226. Where a certificate had already been drawn up, the Tax Recovery Officer could also use these modes without prejudice to certificate-based recovery.

Recovery from salary

The Assessing Officer or Tax Recovery Officer could require a person paying salary to deduct tax arrears from subsequent salary payments and remit the deduction to the Central Government or as directed by the Board. The portion of salary exempt from attachment under section 60 of the Code of Civil Procedure, 1908 remained protected.

Recovery from persons owing money to the assessee

Section 226 also authorised a written notice to a person from whom money was due or might become due to the assessee, or who held or might subsequently hold money for the assessee. The notice could require payment of enough money to satisfy the arrears, or the whole amount held where it was equal to or less than the arrears.

Joint accounts and objections:
  • A notice could extend to money held jointly, with joint holders' shares presumed equal until the contrary was proved.
  • A copy of the notice was to be forwarded to the assessee and, for a joint account, the joint holders.
  • A recipient could object by a statement on oath that the money was not due to the assessee or was not held for the assessee.
  • A materially false statement could result in personal liability within the statutory limits.
  • The recovery notice could be amended or revoked and the time for payment could be extended.

Effect of compliance or non-compliance

A person paying in compliance with the notice was entitled to a receipt and was discharged from liability to the assessee to the extent of that payment. A person who discharged a liability to the assessee after receiving the notice could become personally liable within the statutory limits. Failure to comply could result in the recipient being treated as an assessee in default for the amount specified in the notice.

Money in court and distraint of movable property

The Assessing Officer or Tax Recovery Officer could apply to a court holding money belonging to the assessee for payment of an amount sufficient to discharge the tax. Subject to the prescribed authorisation, arrears could also be recovered by distraint and sale of movable property.

Section 227 of the Income-tax Act, 1961 - recovery through State Government

Section 227 applied where recovery of tax in an area had been entrusted to a State Government under article 258(1) of the Constitution. The State Government could direct that tax in that area, or a part of it, be recovered with and as an addition to a municipal tax or local rate, by the same person and in the same manner as that municipal tax or local rate.

Section 416 of the Income-tax Act, 2025 - current other modes of recovery

Section 416 substantially carries forward the subject matter of old section 226. Where no certificate has been drawn up under section 413, the Assessing Officer may use one or more recovery modes under section 416. Where a section 413 certificate has been drawn up, the Tax Recovery Officer may use section 416 without prejudice to the recovery modes under section 413.

The current provision includes recovery from salary, recovery by notice from third parties holding or owing money for the assessee, recovery of money in court custody and authorised distraint and sale of movable property. It also preserves the protection for salary exempt from attachment under section 60 of the Code of Civil Procedure, 1908.

Section 417 of the Income-tax Act, 2025 - recovery through State Government

Section 417 continues the State Government recovery mechanism. If tax recovery in an area is entrusted to a State Government under article 258(1) of the Constitution, the State Government may direct that tax be recovered with and as an addition to a municipal tax or local rate, by the same person and in the same manner as that municipal tax or local rate is recovered.

Meaning of important terms

Assessing Officer: The income-tax authority vested with assessment and related statutory functions under the applicable provisions of the Income-tax Act.

Tax Recovery Officer: The income-tax authority empowered to undertake recovery proceedings in accordance with the Act and the applicable recovery procedure.

Assessee in default: Broadly, an assessee who fails to pay an amount within the time permitted under the applicable demand and recovery provisions and is consequently treated as being in default.

Distraint: A statutory recovery process involving seizure and sale of movable property for realisation of arrears, subject to the procedure and authorisation prescribed by law.

Official Income Tax references

The applicable recovery provision depends on the origin and date of the demand, the stage of recovery proceedings and the repeal and savings provisions governing matters arising under the Income-tax Act, 1961.