Modes of Recovery of Tax: Attachment and Sale under the Income Tax Act 2025

When an assessee does not pay a tax demand, the Income-tax Act, 2025 lets the department recover it by attaching and selling property, by asking a bank, employer or debtor to pay over money, or by distraint of movable goods. Sections 413 and 416 list the modes; sections 417 to 422 cover recovery through State Governments, foreign agreements, penalties and interest, parallel remedies and non-residents. After the Finance Act, 2026 (effective 1 April 2026), arrest and detention is no longer one of the modes in section 413(1).

This guide explains each mode in plain language, who can use it, and what a recipient of a notice must do. It covers recovery after default. For how a demand and default arise, see our guide to tax recovery, assessee in default and the Tax Recovery Officer. This is information, not legal advice.

What are the modes of recovery under the Income-tax Act, 2025?

Mode	Section	Who acts	Needs a certificate?
Attachment and sale of movable property	413(1)(a)	Tax Recovery Officer (TRO)	Yes
Attachment and sale of immovable property	413(1)(b)	TRO	Yes
Receiver for movable and immovable property	413(1)(c)	TRO	Yes
Deduction from salary	416(3)	Assessing Officer (AO) or TRO	No
Notice to a person who owes or holds money for the assessee	416(5)	AO or TRO	No
Application to a court holding the assessee's money	416(6)	AO or TRO	No
Distraint and sale of movable property	416(7)	AO or TRO, if authorised by an officer of Commissioner rank or above	No

Under section 416(1) and (2), the AO can use the section 416 modes where no certificate has been drawn up under section 413. Where a certificate exists, the TRO can use them in addition to the section 413 modes.

How does the recovery process move from demand to sale?

Rule 225(3)(b) allows an earlier attachment of movable property, with reasons recorded in writing, if the TRO is satisfied the defaulter is likely to conceal, remove or dispose of it. If the defaulter furnishes security the TRO accepts, that attachment is cancelled (rule 225(3)(c)).

What can the Tax Recovery Officer do under section 413?

When an assessee is in default or deemed to be in default, the TRO draws up a certificate stating the arrears and may recover by attachment and sale of movable property, attachment and sale of immovable property, or by appointing a receiver to manage the assessee's movable and immovable property (section 413(1)). Four points matter in practice.

• The TRO can act under section 413(1) whether or not another mode of recovery has already been tried (section 413(2)).
• The assessee cannot dispute the correctness of the certificate on any ground (section 413(3)). The TRO can cancel it or correct a clerical or arithmetical mistake (section 413(4)).
• Property includes certain assets the assessee transferred on or after 1 June 1973 to a spouse, minor child, son's wife or son's minor child without adequate consideration (section 413(5)(a)). For transfers to a minor, the property stays attachable for arrears of earlier periods even after the child turns 18 (section 413(5)(b)).
• Which TRO acts depends on where the assessee carries on business or profession, or where the assessee resides or has property (section 414(1)). If property lies under several TROs, the certificate or a certified copy can be sent to another TRO (section 414(2)).

Can the department take money from my bank account or my customers?

Yes. Under section 416(5), the AO or TRO can serve a written notice on anyone from whom money is due or may become due to the assessee, or who holds or may later hold money for the assessee. That includes banks, debtors and agents. The notice asks for payment either at once or within the time it states, of as much as covers the arrears, or the whole amount if that is less.

What the notice recipient must know:

• A copy goes to the assessee, and to all holders in a joint account (section 416(5)(d)).
• In a joint account, shares are presumed equal until the contrary is proved (section 416(5)(c)).
• A bank, post office or insurer need not wait for the passbook, deposit receipt or policy to be produced (section 416(5)(e)).
• Any claim on the property arising after the notice date is void against the demand (section 416(5)(f)).
• If the recipient swears a statement that nothing is due or held, no payment is required. A statement found false in any material particular makes the person personally liable, up to the lower of their own liability to the assessee or the assessee's liability under the Act (section 416(5)(g), (h)).
• Paying the assessee after receiving the notice makes the recipient personally liable up to the same limit (section 416(5)(k)).
• The AO or TRO must give a receipt, which discharges the payer to that extent (section 416(5)(j)). The notice can be amended, revoked or the payment time extended (section 416(5)(i)).
• If the recipient does not pay, they are deemed an assessee in default for that amount and the notice has the effect of an attachment of a debt under section 413 (section 416(5)(l)).

Can an employer be told to deduct arrears from salary?

Yes. If the assessee receives income taxable under the head "Salaries", the AO or TRO can require the person paying it to deduct arrears from any payment made after the date of the requisition and pay the sum to the Central Government, or as the Board directs (section 416(3)). Salary that a civil court cannot attach under section 60 of the Code of Civil Procedure, 1908, is outside this mode (section 416(4)).

What is distraint, and who can order it?

Distraint is seizure of movable property, a mode that does not depend on a section 413 certificate. The AO or TRO can recover arrears by distraint and sale of movable property if an income-tax authority of Commissioner rank or above has authorised it by general or special order (section 416(7)). Rule 153 says distraint and sale follow, as far as may be, the same manner as attachment and sale of movable property by actual seizure under rule 225.

Worked example 1: bank notice to a business owner (tax year 2026-27)

Assumptions: Meena has arrears of Rs 3,50,000. Her current account holds Rs 1,20,000. A customer owes her Rs 90,000, payable in 30 days. The AO serves section 416(5) notices on the bank and the customer.

Step	Amount (Rs)	Arrears left (Rs)
Arrears at start		3,50,000
Bank holds 1,20,000, less than the arrears, so the whole amount is payable	1,20,000	3,50,000 - 1,20,000 = 2,30,000
Customer owes 90,000, payable at the time stated in the notice	90,000	2,30,000 - 90,000 = 1,40,000

The remaining Rs 1,40,000 can still be pursued by other modes, including a certificate under section 413. Each payer gets a receipt.

Worked example 2: joint account and salary requisition

Assumptions: Ravi owes Rs 2,40,000. He holds Rs 2,00,000 in a joint account with his brother. His employer receives a section 416(3) requisition. The part of salary that can be deducted after section 60 of the Code of Civil Procedure is assumed to be Rs 30,000 a month; the Act does not fix this figure.

Step	Working	Result (Rs)
Ravi's presumed share of the joint account (equal shares, 416(5)(c))	2,00,000 / 2	1,00,000
Arrears after the bank pays that share	2,40,000 - 1,00,000	1,40,000
Months of salary deduction needed	1,40,000 / 30,000 = 4.67, so 5 payments	4 x 30,000 = 1,20,000, then 20,000

If Ravi's brother shows that more of the balance is his, the presumption of equal shares gives way, since it holds only "until the contrary is proved".

Real-life example: the customer who paid the assessee anyway

Suresh runs a shop. The AO serves him a section 416(5) notice because he owes a supplier, Kamal, Rs 60,000 and Kamal is in default. Suresh ignores it and pays Kamal. Suresh is now personally liable to the department for the lower of his own liability to Kamal (Rs 60,000) and Kamal's arrears (section 416(5)(k)). Had Suresh sworn that he owed Kamal nothing, and that been true, no payment would have been required.

Real-life example: arrears on a penalty

Nisha was levied a penalty and did not pay. Section 419 treats any sum imposed as interest, fine, penalty or any other sum payable under the Act as recoverable in the same way as arrears of tax. So the same certificate and notice routes apply to that penalty.

What do sections 417, 418, 419, 421 and 422 add?

Section	What it says
417	Where recovery in an area is entrusted to a State Government under article 258(1) of the Constitution, the State can recover the tax along with municipal tax or local rate, in the same manner.
418	Where India has a recovery agreement with another country, a foreign certificate can be forwarded to a TRO, who recovers it as if it were a section 413 certificate and remits the sum to the Board after deducting expenses. The TRO can also forward a section 413 certificate to the Board for a defaulter who is resident in, or has property in, such a country, and the Board takes the action it considers appropriate under the agreement.
419	Interest, fine, penalty and any other sum payable under the Act are recoverable like tax arrears.
421	Other laws on recovery of Government debts, and a civil suit for arrears, remain available even while recovery under this Part is on.
422	For a non-resident entitled to income referred to in section 9(2), tax can be recovered by deduction under Chapter XIX-B, and arrears can be recovered from any assets of the non-resident that are, or later come, within India. This applies whether the tax is in the non-resident's name or in the name of an agent who is a representative assessee.

How is attached property sold, and can the defaulter get it back?

Step	Movable property	Immovable property
Earliest sale	At least 15 days after the sale proclamation is affixed in the TRO's office, unless the property decays fast, keeping it costs more than its value, or the defaulter agrees in writing (rule 225(40))	At least 30 days after the proclamation is affixed on the property or in the TRO's office, whichever is later, unless the defaulter agrees in writing (rule 225(55))
Mode	Sale on TRO's direction after proclamation (rule 225(37), (38))	Public auction to the highest bidder, subject to the TRO's confirmation and any reserve price (rule 225(56))
Buyer's payment	Sold under the TRO's proclamation and directions (rule 225(37), (38))	25% deposit immediately after the bid is declared; balance by the 15th day from the sale (rule 225(57))
Stopping the sale	Any sale stops if arrears and costs are tendered before the lot is knocked down (rule 225(15)(c))
Setting aside	-	Within 30 days of the sale, the defaulter can apply by depositing the amount in the proclamation with interest at 15% a year from the proclamation date, plus 5% of the purchase money to the purchaser as penalty (rule 225(60))

Property that the Code of Civil Procedure, 1908 exempts from attachment in executing a civil decree is also exempt from attachment and sale here (rule 225(10)(a)). An appeal against a TRO's order under rule 225 lies to the Chief Commissioner or Commissioner within 30 days, and the appellate authority may stay execution.

Can recovery be paused?

The TRO may grant time to pay and must stay recovery until that time expires (section 415(1)). If a certificate has been drawn up and the demand is later reduced by an order modified in appeal or another proceeding, the TRO stays recovery of the reduced part while the further proceeding is pending, or amends or cancels the certificate once the order is final (section 415(2)).

Common mistakes

• Treating a section 416(5) notice as optional. Non-payment makes the recipient an assessee in default.
• Paying a customer, tenant or supplier after a notice has arrived. Personal liability follows under section 416(5)(k).
• Assuming a pending appeal automatically stops recovery. Section 415 gives the TRO power to grant time or stay recovery; filing an appeal does not by itself trigger it.
• Trying to argue the amount at the certificate stage. Section 413(3) bars disputes on the certificate itself; raise the dispute in the appeal or rectification route.
• Assuming transfers to family protect assets. Section 413(5) can reach certain transfers made without adequate consideration.
• Assuming a joint account is only half exposed. The half share is a presumption that can be rebutted.

Quick reference

Item	Rule	Reference
Time to pay after TRO notice	15 days from service	Rule 225(2)
Distraint authorisation	Commissioner rank or above	Section 416(7)
Joint account share	Equal until contrary proved	Section 416(5)(c)
Receiver	Available to TRO	Section 413(1)(c)
Arrest and detention	Removed from section 413(1) w.e.f. 1 April 2026	Finance Act, 2026

Where this is in the Act

• Section 413: certificate and modes of recovery by the TRO; section 414: which TRO; section 415: stay and cancellation.
• Section 416: other modes (salary, notice to debtors and banks, court money, distraint).
• Section 417: State Government; section 418: foreign agreements; section 419: penalties and interest; section 421: suit and other laws; section 422: non-residents.
• Rule 225: procedure for recovery; rule 153: distraint and sale.

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