Section 276BB and 276C of Income Tax Act 1961: TCS Default and Wilful Tax Evasion
Sections 276BB and 276C are prosecution provisions in Chapter XXII of the Income Tax Act, 1961. Section 276BB concerns failure to pay tax collected at source to the Central Government. Section 276C deals with a wilful attempt to evade tax, penalty or interest, under-report income, or evade payment of tax, penalty or interest.
Section 276BB - Failure to pay tax collected at source
Section 276BB applies where a person fails to pay to the credit of the Central Government tax collected by that person as required under Section 206C.
What is Section 206C?
Section 206C contains the statutory provisions for collection of tax at source, commonly called TCS, in the cases and at the rates specified by the Income Tax Act. A person who collects tax under the provision must comply with the statutory requirements for payment and reporting.
Essential elements of Section 276BB
- Tax must have been collected as required under Section 206C.
- The person must have failed to pay the collected tax to the credit of the Central Government as required by law.
- The applicable statutory version, payment date and statement filing deadline should be verified for the relevant period.
Relief where TCS is deposited by the statement deadline
With effect from 1 April 2025, Section 276BB contains a proviso under which the prosecution provision does not apply if the TCS payment has been made to the credit of the Central Government on or before the time prescribed for filing the statement under the proviso to Section 206C(3) for that payment.
Punishment and the 2026 amendment
Under the earlier version of Section 276BB, the offence was punishable with rigorous imprisonment for not less than three months but which could extend to seven years, together with fine. Finance Act, 2026 substituted the punishment structure with effect from 1 March 2026. Under the substituted provision, punishment depends on the amount involved: where it exceeds Rs. 50 lakh, simple imprisonment up to two years, or fine, or both; where it exceeds Rs. 10 lakh but does not exceed Rs. 50 lakh, simple imprisonment up to six months, or fine, or both; and in any other case, fine. The statutory protection for timely payment by the prescribed statement deadline continues.
Section 276C - Wilful attempt to evade tax, penalty or interest
Section 276C is directed at a wilful attempt to evade tax, penalty or interest. Sub-section (1) addresses wilful attempts to evade tax, penalty or interest chargeable or imposable, and under-reporting of income. Sub-section (2) separately addresses wilful attempts to evade the payment of tax, penalty or interest.
Section 276C(1) - Evasion of liability or under-reporting
The prosecution must concern a wilful attempt in any manner to evade tax, penalty or interest chargeable or imposable under the Act, or to under-report income. The requirement of a wilful attempt distinguishes the offence from a merely accidental or inadvertent error.
Section 276C(2) - Evasion of payment
Sub-section (2) deals with a wilful attempt to evade the payment of tax, penalty or interest. It therefore addresses evasion at the payment stage, while sub-section (1) addresses the attempt to evade the liability itself or under-report income.
Statutory examples of a wilful attempt
The Explanation to Section 276C includes cases where a person:
- possesses or controls relevant books or documents containing a false entry or statement;
- makes or causes a false entry or statement in relevant books or documents;
- wilfully omits or causes the omission of a relevant entry or statement; or
- causes any other circumstance to exist that enables evasion of tax, penalty or interest or its payment.
Punishment and the 2026 amendment
Before the Finance Act, 2026 substitution, Section 276C(1) prescribed rigorous imprisonment of six months to seven years with fine where the amount sought to be evaded or tax on under-reported income exceeded Rs. 25 lakh, and rigorous imprisonment of three months to two years with fine in other cases. Section 276C(2) prescribed rigorous imprisonment of three months to two years and discretionary fine.
Finance Act, 2026 substituted Section 276C with effect from 1 March 2026. For Section 276C(1), where the amount sought to be evaded or tax on under-reported income exceeds Rs. 50 lakh, punishment is simple imprisonment up to two years, or fine, or both; where it exceeds Rs. 10 lakh but does not exceed Rs. 50 lakh, simple imprisonment up to six months, or fine, or both; and in any other case, fine. The amended provision similarly introduces amount-based punishment for wilful evasion of payment under Section 276C(2). The version applicable to the date of the alleged offence must therefore be identified before stating the punishment.
Section 276BB and Section 276C - Difference
| Provision | Conduct covered | Core issue |
|---|---|---|
| Section 276BB | Failure to pay TCS collected under Section 206C to the Central Government. | Collection of tax followed by failure to deposit it as required. |
| Section 276C(1) | Wilful attempt to evade tax, penalty or interest, or under-report income. | Wilfulness and an attempt directed at evading liability or under-reporting. |
| Section 276C(2) | Wilful attempt to evade payment of tax, penalty or interest. | Wilful evasion at the payment stage. |
Prosecution sanction under Section 279
Section 279 regulates institution of prosecution for specified offences, including Sections 276BB and 276C, and requires previous sanction of the competent income-tax authority specified by the provision. The sanction must be examined with reference to the statutory text applicable at the relevant time and the material considered by the sanctioning authority.
Presumption as to culpable mental state
Section 278E contains a statutory rule concerning culpable mental state in prosecutions for offences under the Income Tax Act that require such a mental state. Its operation, the burden prescribed by the statute and the evidence in the particular prosecution must be considered together. This is especially relevant to Section 276C because the section expressly uses the word "wilfully".
Evidence law before Bharatiya Sakshya Adhiniyam, 2023
For proceedings governed by the general evidence law before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024, the Indian Evidence Act, 1872 was the general evidence statute, subject to the special provisions of the Income Tax Act and applicable criminal procedure. Relevant material could include books of account, returns, assessment records, TCS statements, challans, bank records, notices, correspondence, seized documents, electronic records and evidence bearing on the alleged wilful attempt. Electronic records were governed, among other applicable provisions, by the Indian Evidence Act provisions then in force.
Official references
- Income Tax Act resources - Income Tax Department
- Income Tax Act 1961 as amended by Finance Act 2025 - official PDF
- Section 276C - Income Tax Department
- Finance Act 2026 - Income Tax Department
- Income Tax e-Filing Portal
- India Code - Central legislation
Important: Prosecution provisions are date-sensitive. The alleged act, tax period, amount involved, date of payment, applicable statutory amendments, sanction and procedural law should be verified before applying Section 276BB or Section 276C to a particular case.