Section 191 of ITA, 1961 : Section 191: Direct Payment

Explanation using Example

Imagine a freelance graphic designer, Priya, who receives a lump sum payment for a project from a small company. The company does not deduct tax at source (TDS) on this payment because it's not aware of the provisions or neglects its duty to deduct tax. According to Section 191 of the Income-tax Act, 1961, Priya is responsible for paying the income tax on that income directly to the government since no tax was deducted at the time of payment.

If Priya also fails to pay the required tax on this income, the company, being the payer, may be considered an 'assessee in default' for not deducting the tax and could face consequences under the Income-tax Act, specifically under section 201.