Section 391
Section 391: direct payment of tax
Section 391 is the fallback rule for income that escapes TDS - either because no deduction provision applies to it, or because deduction should have happened but did not. In such cases the assessee must pay the tax directly, and a person who fails to deduct or pay over TDS can be treated as an assessee in default.
When tax is payable directly by the assessee
Income-tax on any income is payable directly by the assessee if there is no provision under this Chapter to deduct income-tax on that income at the time of payment, or if income-tax has not been deducted as required under this Chapter.
Eligible start-up ESOPs and sweat equity shares
If an assessee has income of the nature specified in Section 17(1)(d) (specified security or sweat equity shares), and such shares are allotted or transferred directly or indirectly by an employer that is an eligible start-up referred to in Section 140, direct payment of tax is made in accordance with Section 289(3).
Consequence of failure by both deductor and assessee
Where a person - including the principal officer of a company - who is required to deduct any sum under this Act, or an employer referred to in Section 392(2)(a), does not deduct the tax, or after deducting fails to pay it, or does not pay the whole or any part of it as required, and the assessee has also failed to pay such tax directly, then that person is deemed to be an assessee in default within the meaning of Section 398(1), in respect of such tax, apart from any other consequences that person may incur.
Frequently asked questions
When must an assessee pay tax directly instead of relying on TDS?
Where the Chapter has no TDS provision covering that income, or where TDS was required but was not actually deducted.
Can a defaulting deductor be treated as an assessee in default under Section 391?
Yes - if the deductor (or an employer under Section 392(2)(a)) fails to deduct or pay tax, and the assessee has also failed to pay it directly, the deductor is deemed an assessee in default under Section 398(1).
Related sections
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Talk to our team about TDS default and direct tax paymentLast updated 9 September 2026