Income-tax law | Tax collection and recovery
Section 202 of the Income-tax Act, 1961: Deduction Is Only One Mode of Recovery
Tax deducted at source (TDS) is a statutory mechanism for collecting income tax. Section 202 makes clear that the power to recover tax through deduction does not exclude other lawful methods of recovering tax. This guide explains the provision, its effect, related sections, and the corresponding framework under the Income-tax Act, 2025.
Updated: 27 October 2026 | India
1. Meaning and purpose of Section 202
Section 202 falls in Chapter XVII of the Income-tax Act, 1961, which deals with collection and recovery of tax. Its heading is "Deduction only one mode of recovery." In substance, the provision states that the power to recover tax by deduction under the preceding provisions of the chapter operates without prejudice to any other mode of recovery.
Statutory text: "The power to recover tax by deduction under the foregoing provisions of this Chapter shall be without prejudice to any other mode of recovery."
Section 202, Income-tax Act, 1961
The phrase "without prejudice" means that using or providing for TDS does not, by itself, take away other statutory tax collection or recovery powers. It does not authorize recovery in excess of the lawful tax liability.
2. Key legal expressions explained
- Tax deducted at source (TDS)
- Tax withheld by a person making a specified payment, in accordance with applicable statutory conditions, and required to be remitted to the Central Government.
- Mode of recovery
- A legally permitted mechanism for collecting or recovering income tax, including deduction at source, direct payment, advance tax, or statutory recovery proceedings where applicable.
- Deductor
- The person responsible under the applicable provision for deducting tax from a payment or credit.
- Assessee
- A person within the statutory meaning of the applicable income-tax law, including a person by whom tax or another sum is payable.
- Tax credit
- Recognition of tax deducted or otherwise paid against the liability of the person entitled to credit, subject to statutory rules.
3. How Section 202 works
- TDS is not the final measure of liability. The final income-tax liability is determined under the relevant charging, computation and assessment provisions. TDS may be lower or higher than the ultimate liability.
- Other payment obligations remain. Where applicable, advance tax, self-assessment tax or other direct-payment requirements can continue even if some tax has been deducted at source.
- Recovery is subject to statutory safeguards. The department must follow the relevant demand, collection and recovery provisions. Section 202 does not permit arbitrary or duplicate collection.
- Credit must be considered. Tax properly deducted and paid is generally eligible for credit under Section 199 and the applicable rules; it is not an additional tax over and above the same underlying liability.
4. Practical examples
Example A: TDS does not cover the full tax
An individual has a final income-tax liability of Rs. 80,000 and eligible TDS credit of Rs. 55,000. Subject to other credits, payments and adjustments, the remaining Rs. 25,000 is payable through the applicable mechanism. Section 202 confirms that the existence of TDS does not eliminate the balance.
Example B: Excess TDS
If the final tax liability is Rs. 30,000 and eligible TDS credit is Rs. 40,000, the excess Rs. 10,000 may be refundable under the applicable return, assessment and refund provisions. Section 202 does not create an extra tax liability.
Example C: Deductor fails to deposit TDS
Where tax has been deducted but not deposited, consequences for the deductor are addressed separately under Section 201 of the 1961 Act and relevant provisions of the 2025 Act. The recipient's protection and credit position must be considered under the applicable law, including Section 205 of the 1961 Act where relevant. Section 202 should not be read in isolation.
5. Income-tax Act, 2025: corresponding provision
The Income-tax Act, 2025 applies from 1 April 2026, subject to its commencement, repeal, savings and transitional provisions. The corresponding principle is incorporated into Section 390(4) in Chapter XIX (Collection and Recovery of Tax).
Section 390(4) provides that payment of tax by the methods specified in Section 390(1) is in addition to any other mode of tax recovery for discharging liability in respect of income assessed for a tax year. Section 390(1) refers to deduction or collection at source, advance payment, and the specified employer payment under Section 392(2)(a).
The 2025 Act therefore carries forward the central principle of Section 202 while placing it within a wider provision dealing with TDS, TCS and advance payment. For earlier years and pending matters, identify the law governing the relevant tax period and any savings rules.
| Issue | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Core principle | Section 202 | Section 390(4) |
| Chapter | Chapter XVII: Collection and recovery of tax | Chapter XIX: Collection and recovery of tax |
| Scope | TDS recovery does not exclude other recovery methods | Specified tax payments are in addition to other recovery methods |
| Related tax credit | Section 199 | Section 390(5) and (6) |
7. Frequently asked questions
Does TDS fully settle income-tax liability?
Not necessarily. The taxpayer must compute the final liability and account for all eligible credits and payments. Any remaining liability may still be payable.
Can the government recover the same tax twice?
No. Section 202 preserves lawful recovery mechanisms; it does not authorize double recovery of the same liability. Credit, adjustments and statutory protections remain relevant.
Is Section 202 a TDS rate or penalty provision?
No. It is a general rule about methods of tax recovery. Rates, deductor obligations, interest and penalties arise under other provisions.
Which provision applies from 1 April 2026?
For the new statutory framework, see Section 390(4) of the Income-tax Act, 2025. The applicable law for a particular earlier year or proceeding must be determined with reference to transitional and savings provisions.
8. Official law and reference links
- Income Tax Department: Section 202 (1961 Act)
- Income Tax Department: Income-tax Act, 1961, as amended by Finance Act, 2025 (PDF)
- Income Tax Department: Income-tax Act, 2025, as amended by Finance Act, 2026 (PDF)
- Income Tax Department: e-Filing portal
This article is a general explanation. For a specific demand, default, credit or recovery proceeding, consult the applicable statute, rules, notifications and official records.