Section 422 of the Income-tax Act, 2025 — Recovery of Tax Arrear from a Non-Resident's Assets in India

In plain language

What Section 422 says in plain English

Section 422 of the Income-tax Act, 2025 is a recovery (collection) provision. It tells the tax department how it can collect tax that a non-resident owes on income that is deemed to arise in India. It is the direct successor to Section 173 of the old Income-tax Act, 1961, carried forward with modernised drafting and effective from 1 April 2026.

The core idea is simple: where a non-resident is entitled to income referred to in Section 9(2) (income deemed to accrue or arise in India, typically through a business connection), the tax on that income can be collected in two ways — and this applies whether the assessment is in the non-resident's own name or in the name of an agent who is liable as a representative assessee:

• (a) By deduction at source under Chapter XIX-B (the TDS/withholding machinery for payments to non-residents), so tax is captured before the money leaves India; and
• (b) From assets in India — any arrears of tax may also be recovered from any assets of the non-resident which are, or may at any time come, within India.

Crucially, Section 422 begins with a non-obstante override: it applies irrespective of anything in Section 304(1) or (5) (the general rules on liability of a representative assessee). So even if the ordinary representative-assessee rules would limit recovery, Section 422 keeps the door open to recovering from the non-resident's Indian assets.

Who does it apply to?

• Non-residents (individuals, companies, firms, LLPs, trusts) earning India-sourced income under Section 9(2) — for example, profits from a business connection in India, fees for technical services, royalties, or capital gains on Indian assets.
• Agents / representative assessees in India of such non-residents — the tax can be assessed and recovered in the agent's name too.
• It does not apply to genuinely resident taxpayers; ordinary recovery provisions govern them.

The key phrase — "are, or may at any time come, within India"

This is the sharpest teeth of the section. Recovery is not limited to assets the non-resident holds today. If Indian assets exist now, they can be attached; and if new assets enter India in the future — a future remittance, a newly acquired flat, shares credited to a demat account, sale proceeds routed through an Indian bank — those too can be tapped to clear old arrears. The word "assets" is deliberately not exhaustively defined, so it covers immovable property, bank balances, shares, securities, receivables and other movable property.

How it interacts with related sections

• Section 9(2) decides whether the income is taxable in India (the charge). Section 422 only decides how the resulting tax is collected.
• Chapter XIX-B (TDS on non-residents) is the first line of collection — the payer withholds tax before paying the non-resident.
• Section 304 (representative assessee) is expressly overridden so that recovery from Indian assets is preserved.
• Sections 413–421 (the recovery machinery — Tax Recovery Officer, certificate, attachment, and the "recovery by suit not affected" rule in Section 421) supply the actual attachment and sale procedure once arrears are certified.

Practical implications

• NRIs must reconcile and clear dues — even after leaving India, Indian bank accounts, property and demat holdings remain exposed to recovery.
• Agents face real exposure — an Indian agent treated as a representative assessee can be assessed and pursued; agents should retain indemnities and provision for tax.
• No safe-harbour by leaving the country — moving assets out does not extinguish the liability; assets returning to India later can still be attached.
• TDS is the cleaner route — deducting correctly at source (Chapter XIX-B) usually removes the need for later asset attachment.