Section 204 of ITA, 1961 : Section 204: Meaning Of ―Person Responsible For Paying‖

Explanation using Example

Imagine a scenario where a software development company, Tech Innovations Pvt. Ltd., employs Mr. Arjun as a software engineer. At the end of the financial year, the company needs to pay Arjun his annual bonus, which is considered income under the head "Salaries". According to Section 204 of the Income-tax Act, 1961, Tech Innovations Pvt. Ltd. is responsible for deducting the appropriate tax at source (TDS) on this bonus payment.

In this case, Tech Innovations Pvt. Ltd. is the "person responsible for paying" as per clause (1) of Section 204, because they are Arjun’s employer and not a government entity. Hence, the company must calculate and deduct the TDS on Arjun's bonus before making the final payment to him. It is also the company's responsibility to deposit the TDS with the government and file the necessary returns.