Section 201 → Section 235
Consequences of failure to deduct or pay (Assessee in Default)
Quick Answer
Section 201 of the Income Tax Act, 1961 (Consequences of failure to deduct or pay (Assessee in Default)) corresponds to Section 235 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 201
Section 201 of the 1961 Act sets out the rules on consequences of failure to deduct or pay (assessee in default). If a person fails to deduct TDS or pay it to the Govt, they are treated as an 'Assessee in Default' and must pay interest @ 1% or 1.5% per month.
From 1st April 2026, the same subject sits at Section 235 of the Income-tax Act, 2025 — retained and renumbered as Section 235 of the Income-tax Act, 2025. Retained. Interest calculation is automated on the TRACES portal.
For Section 201, the practical impact is rated High. Severe financial impact for payroll and accounts departments.
Sec 201
Provision Summary
If a person fails to deduct TDS or pay it to the Govt, they are treated as an 'Assessee in Default' and must pay interest @ 1% or 1.5% per month.
Sec 235
Provision Summary
Retained. Interest calculation is automated on the TRACES portal.
Key Changes & Highlights
- Liability is waived only if the payee has filed their return and paid the taxes (as per Second Proviso).
Related Sections
Related Articles from the Tax Academy
corporate compliance
Guide to Section 194H TDS on Brokerage: New 2% Rate for 2026
A professional compliance guide for the transition to the new 2% TDS rate and ₹20,000 threshold for brokerage under Section 194H, aligning with the Income-tax Act, 2025.
corporate compliance
Section 195 TDS Guide: Navigating the Income-tax Act, 2025
A professional compliance guide for corporations on the transition from the Income Tax Act 1961 to the Income-tax Act, 2025, focusing on TDS on payments to non-residents under Section 195.
general transition
Income-tax Act, 2025: Section 201 is Now Section 398 - TDS Default Guide
Expert guide on the transition from Section 201 of the Income Tax Act 1961 to the new Section 398 of the Income-tax Act, 2025 for TDS defaults. Learn about changes, compliance, and new section mapping.
nri taxation
NRI PAN Error: Guide to Penalties on Rental Income Under New Tax Law
A professional guide for NRI landlords on the PANNOTAVBL error, penalties under the Income Tax Act, and the impact of the new Income-tax Act, 2025. Learn to avoid high TDS rates.
nri taxation
NRI Rent TDS 2026: Challan 281 & Income-tax Act, 2025 Compliance Guide
Comprehensive guide for tenants and NRIs on 31.2% TDS deduction for rental income in 2026 using Challan 281, navigating the Income Tax Act 1961 and potential Income-tax Act, 2025 changes.
Frequently Asked Questions
What is Section 201 of the Income Tax Act, 1961 about?
Section 201 of the Income Tax Act, 1961 covers consequences of failure to deduct or pay (assessee in default). If a person fails to deduct TDS or pay it to the Govt, they are treated as an 'Assessee in Default' and must pay interest @ 1% or 1.5% per month.
Which section replaces Section 201 in the Income-tax Act, 2025?
Section 201 of the Income Tax Act, 1961 maps to Section 235 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained. Interest calculation is automated on the TRACES portal.
What is the impact of the change to Section 201 under the new tax code?
The transition impact for Section 201 is rated High. Severe financial impact for payroll and accounts departments.
What should I watch out for when Section 201 moves to the 2025 code?
Liability is waived only if the payee has filed their return and paid the taxes (as per Second Proviso). These points are specific to Section 201 (Consequences of failure to deduct or pay (Assessee in Default)).
Disclaimer: This mapping of Section 201 (Consequences of failure to deduct or pay (Assessee in Default)) to Section 235 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 201 is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
Need professional help on Section 201?
Compare trusted providers — both offer CA services ready for the Income-tax Act, 2025.
*Affiliate links — we may earn a small commission at no extra cost to you. Disclosure.
Want to calculate tax on this section?