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Income tax · Notice

TDS default: assessee in default (Section 201)

A person who does not deduct tax at source, deducts it but does not pay it, or does not pay it after deduction, is deemed to be an assessee in default for that tax, with interest at 1% per month or part of a month from the date the tax was deductible to the date of deduction, and 1.5% per month from deduction to payment (Section 201(1A)). What to do: check the time limit for the order, then test the payee-return escape route. The notice states the date — read it from the document.

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Key facts

A person who does not deduct tax at source, deducts it but does not pay it, or does not pay it after deduction, is deemed to be an assessee in default for that tax, with interest at 1% per month or part of a month from the date the tax was deductible to the date of deduction, and 1.5% per month from deduction to payment (Section 201(1A)). A show-cause notice usually precedes the order under Section 201(1)/(1A).

NoticeTDS default: assessee in default (Section 201)
Issued byThe Income Tax Department (the authority named on the notice)
Issued underSection 201(1) and (1A), Income-tax Act 1961
Income-tax Act 2025Section 398(1), (3) and (5), Income-tax Act 2025
What it asks of youA reply, within the time allowed
Your time to actThe notice states the date — read it from the document.
If it is ignoredAn order under Section 201(1)/(1A) follows, with a notice of demand under Section 156 payable within 30 days of service (Section 220(1)).

Time allowed

The notice states the date — read it from the document. The Act fixes no reply period for a show-cause before the order: reply by the date the notice states. Once an order is passed, the appeal runs 30 days from service (Section 249(2)).

The date stated on your notice always wins.

What to do now

  1. Check the time limit for the order

    No order under Section 201(1) treating a person as in default can be made after 6 years from the end of the financial year in which the payment is made or credit is given, or 2 years from the end of the financial year in which a correction statement is delivered, whichever is later (Section 201(3)).

  2. Test the payee-return escape route

    There is no default for a failure to deduct where the payee filed a return under Section 139, included the sum, and paid the tax on it, and you furnish an accountant's certificate in the prescribed form (first proviso to Section 201(1)); the form number is to be confirmed with our expert team.

  3. Reply by the date in the notice, with the challans and the payee details

    On the e-filing portal go to Dashboard > Pending Actions > e-Proceedings, open View Notice, then Submit Response (partial or full, with remarks and attachments). A response cannot be edited or withdrawn after submission; a Transaction ID and an e-mail confirm it. Pay the interest under Section 201(1A) before filing the statement under Section 200(3); the TRACES route for these notices is to be confirmed with our expert team.

  4. Check the Document Identification Number (DIN)

    Every notice, order or letter should be referenced by a computer-generated DIN, in its body, in a covering document or in the covering e-mail (CBDT Circular 4/2026, which withdrew Circular 19/2019). A missing DIN is a point to raise with our expert team; by itself it does not invalidate an assessment that is referenced by a DIN in any manner (Section 292BA).

What a reply contains

A reply usually covers the points below. This is an outline, not a draft: our expert team writes it on your own records.

  1. Reference: the notice's reference number and date, your PAN and the period it covers.
  2. An answer to each point the notice raises, in the same order, saying what you accept and what you dispute.
  3. Evidence for each point (from the steps for this notice): reply by the date in the notice, with the challans and the payee details.
  4. Where it is filed: e-Proceedings on the income-tax e-filing portal.

If it is ignored

  • An order under Section 201(1)/(1A) follows, with a notice of demand under Section 156 payable within 30 days of service (Section 220(1)).
  • No penalty under Section 221 is imposed unless the Assessing Officer is satisfied that the failure was without good and sufficient reason (second proviso to Section 201(1)).
  • An order under Section 201 is appealable to the JCIT(A) / CIT(A) within 30 days of service (Sections 246A(1)(ha), 249(2)).

Official sources

Sources checked on 22 October 2026.

Frequently asked questions

What is an income-tax Section 201 notice?

A person who does not deduct tax at source, deducts it but does not pay it, or does not pay it after deduction, is deemed to be an assessee in default for that tax, with interest at 1% per month or part of a month from the date the tax was deductible to the date of deduction, and 1.5% per month from deduction to payment (Section 201(1A)). A show-cause notice usually precedes the order under Section 201(1)/(1A).

How much time do I have to act on an income-tax Section 201 notice?

The notice states the date — read it from the document. The Act fixes no reply period for a show-cause before the order: reply by the date the notice states. Once an order is passed, the appeal runs 30 days from service (Section 249(2)). The date stated on your notice always wins.

What happens if I ignore an income-tax Section 201 notice?

An order under Section 201(1)/(1A) follows, with a notice of demand under Section 156 payable within 30 days of service (Section 220(1)). No penalty under Section 221 is imposed unless the Assessing Officer is satisfied that the failure was without good and sufficient reason (second proviso to Section 201(1)). An order under Section 201 is appealable to the JCIT(A) / CIT(A) within 30 days of service (Sections 246A(1)(ha), 249(2)).

Related guides

General information from the provisions this notice is issued under, not legal advice. The dates and periods stated on your notice always win. Our expert team can read the full notice with you.