Liability of directors of private company
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 323(1) of Income Tax Act 2025
(1) Irrespective of anything contained in the Companies Act, 2013, where any tax due from—
(a) a private company in respect of any income of any tax year; or
(b) any other company in respect of any income of any tax year during which such other company was a private company,
cannot be recovered, then, every person, who was a director of the private company at any time during the relevant tax year, shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.
Section 323(2) of Income Tax Act 2025
(2) Where a private company is converted into a public company and the tax assessed in respect of any income of any tax year during which such company was a private company cannot be recovered, then, nothing contained in sub-section (1) shall apply to any person who was a director of such private company in relation to any tax due in respect of any income of such private company assessable for any tax year commencing before the 1st April, 1961.
Section 323(3) of Income Tax Act 2025
(3) In this section, “tax due” includes penalty, interest, fees or any other sum payable under the Act.