Income-tax law / Tax collection at source
Section 271CA: Penalty for Failure to Collect Tax at Source (TCS)
Section 271CA of the Income-tax Act, 1961 deals with a collector's failure to collect tax at source as required by Chapter XVII-BB. The penalty is generally equal to the tax that should have been collected, subject to the statutory reasonable-cause defence and the applicable legal framework.
What is Section 271CA?
Tax collection at source (TCS) is a mechanism requiring a specified seller, collector or other responsible person to collect income tax from a buyer or other person in circumstances prescribed by law. Under the 1961 Act, Chapter XVII-BB, principally Section 206C, sets out the collection obligations for specified transactions, rates, exemptions, declarations and compliance conditions.
Section 271CA concerns failure to collect the whole or any part of TCS that was legally required. It does not automatically apply merely because a transaction occurred: first establish that the particular transaction, person, threshold and period were covered by the TCS provision in force at that time.
Section 271CA: Statutory text and explanation
Sub-section (1): If any person fails to collect the whole or any part of the tax as required by or under the provisions of Chapter XVII-BB, then such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to collect as aforesaid.
Sub-section (2): Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.
Legislative history: Section 271CA was inserted by the Finance Act, 2006 (Act 21 of 2006), section 52, with effect from 1 April 2007. The wording above reflects the source provision; its application must be considered with amendments and transition rules relevant to the tax year.
The expression Joint Commissioner identifies the officer empowered by sub-section (2) to impose the penalty. The reference to Chapter XVII-BB identifies the underlying collection duties, rather than creating a separate TCS charge.
How is the Section 271CA penalty calculated?
The statutory amount equals the TCS that ought to have been collected but was not collected. It is not a flat penalty, and the provision does not prescribe a separate percentage of turnover.
| Illustrative situation | TCS required | TCS collected | Potential penalty |
|---|---|---|---|
| Entire TCS omitted | Rs. 40,000 | Nil | Rs. 40,000 |
| Partial collection | Rs. 40,000 | Rs. 15,000 | Rs. 25,000 |
Examples are illustrative only. Liability depends on the applicable transaction-specific rules, relevant dates, facts, statutory relief and adjudication.
Can the penalty be avoided where there was reasonable cause?
Section 273B of the 1961 Act provides that, notwithstanding Section 271CA, no penalty is imposable if the person proves that there was reasonable cause for the failure. This is a fact-sensitive statutory defence, not an automatic waiver.
Supporting evidence may include transaction records, contemporaneous correspondence, professional advice, proof of a genuine interpretation dispute, system failures outside reasonable control, or evidence of steps promptly taken to rectify the default. Mere oversight or financial difficulty does not by itself establish reasonable cause.
The collector should establish both the legal basis for non-collection and any defence with records for the relevant period.
Penalty proceedings and related provisions
Opportunity to be heard and time limits
Section 274 provides procedural safeguards for penalty orders, including a reasonable opportunity of being heard. Section 275 governs limitation for penalty orders, subject to its applicable provisions and amendments. Any notice should be checked for the correct transaction, tax year, authority and limitation period.
Difference between non-collection and non-payment
Section 271CA targets the failure to collect TCS. Where TCS has been collected but not deposited, the legal consequences must be examined separately under Section 206C and other applicable provisions. Interest, recovery or prosecution issues should not be confused with the penalty for non-collection.
Collector-in-default and interest
Section 206C(6A) addresses circumstances in which a person responsible for collecting tax may be treated as an assessee in default, subject to statutory conditions and exceptions. Section 206C(7) concerns interest. The applicability of these provisions does not, without further analysis, resolve whether a Section 271CA penalty is imposable.
Difference from Section 271C
Section 271C concerns failure to deduct tax at source (TDS) in the specified circumstances; Section 271CA concerns failure to collect tax at source (TCS). The two obligations operate under different chapters and transaction rules.
Income-tax Act, 2025: Check the applicable tax year
The Income-tax Act, 2025 came into effect on 1 April 2026. For a historical TCS default, the relevant tax year, the law applicable when the obligation arose, and the saving and transitional provisions must be checked. Do not assume that section numbering or penalty mechanisms in the 1961 Act apply unchanged to tax years governed by the 2025 Act.
For transactions in later tax years, consult the current legislation, notifications and rules on the official portals before determining the collection obligation or consequence of non-compliance.
Official law and reference sources
- Income Tax Department - official portal (Acts, rules, notifications and circulars).
- India Code - central legislation (statutory text and amendments).
- Income-tax Act, 1961 - Income Tax Department.
- Income Tax e-Filing portal (compliance services).
Consult the version of the legislation applicable to the transaction date. This article provides general legal information and is not a substitute for advice on specific facts.
Frequently asked questions
What is the penalty under Section 271CA?
It equals the amount of TCS that the person was legally required to collect but failed to collect, subject to applicable statutory relief.
Who can impose a Section 271CA penalty?
Under Section 271CA(2), the Joint Commissioner imposes the penalty.
Is Section 273B reasonable-cause relief available?
Yes. Section 273B provides a defence where the person proves reasonable cause for the failure.
Does Section 271CA apply to TDS?
No. Section 271CA deals with TCS. TDS non-deduction is addressed separately, including under Section 271C where applicable.