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Income Tax Law | Updated 27 October 2026

Section 227 of the Income-tax Act, 1961: Recovery Through State Government

Section 227 provided a special mechanism for recovering income-tax through a State Government where the Central Government had entrusted that recovery function to the State under Article 258(1) of the Constitution of India. The corresponding provision in the Income-tax Act, 2025 is Section 417.

Current-law update: The Income-tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act subject to savings and transitional provisions. Earlier tax liabilities remain enforceable; the applicable procedure depends on the relevant statutory and transitional rules.

Text and scope of Section 227

The provision, titled Recovery through State Government, appeared in Chapter XVII (Collection and Recovery of Tax) of the Income-tax Act, 1961.

Where recovery of tax in an area has been entrusted to a State Government under Article 258(1), the State Government may direct that tax be recovered in that area, or part of it, together with and in addition to a municipal tax or local rate, by the same person and in the same manner as that municipal tax or local rate.

This is a plain-language rendering. For the authoritative wording, see the Income Tax Department's Section 227 text.

Meaning and legal requirements

1. Entrustment under Article 258(1)

Article 258(1) permits the President, with the consent of the State Government, to entrust functions of the Union to that State Government or its officers, subject to conditions. Section 227 operates only where the relevant tax recovery function has actually been entrusted.

2. Territorial scope

The State Government may issue a direction covering the entrusted area or a specified part of it. Section 227 does not itself confer a general power on every State Government to recover all central income-tax dues.

3. Collection alongside local levies

Following a valid direction, the entrusted income-tax amount may be collected along with, and in addition to, municipal tax or a local rate, using the same collection personnel and procedure. The income-tax liability remains distinct from the municipal tax or local rate.

4. Existing tax liability

This is a collection mechanism, not a charging provision. It does not independently create an income-tax assessment, impose a new municipal levy, or determine the amount of tax due.

Section 417 of the Income-tax Act, 2025

Section 417, titled Recovery through State Government, carries forward the substance of the earlier Section 227. It permits State-directed recovery of tax with municipal tax or local rates where recovery has been entrusted under Article 258(1).

From 1 April 2026, the 2025 Act is the principal income-tax statute. Section 536 contains repeal and savings provisions. Outstanding demands and recovery actions under the former law do not automatically lapse merely because the 1961 Act was repealed. See the official transition guidance and tax recovery FAQs.

Illustrative example

Suppose recovery of specified central income-tax dues in a locality has lawfully been entrusted to a State Government. If that State Government issues an appropriate direction, the authorised local collector may recover those dues together with municipal taxes using the prescribed local collection process. Without the necessary entrustment and direction, Section 227 alone is not authority for this arrangement.

Article 258(1), Constitution of India: Entrustment of Union functions to a State Government with its consent. Section 226, Income-tax Act, 1961: Other modes of tax recovery. Section 228A: Recovery under agreements with foreign countries. Section 229: Recovery of penalties, interest, fines and other sums. Section 232: Preserves recovery under other laws or by suit. Their corresponding provisions and transition rules should be checked for matters arising under the 2025 Act.

A person receiving a recovery demand should verify the assessment or demand reference, identity and authority of the collecting officer, the amount claimed, applicable payment credit, and the legal basis of the recovery direction. Disputes should be pursued through the applicable statutory process rather than assuming that a municipal collection notice is itself an income-tax assessment.

Official statutory sources

General legal information only. The applicable statute, notification, entrustment order and procedural facts must be verified for an individual matter.