Table of Contents
Major penalty provisions Income Tax Act, 2025 vs. Income Tax Act, 1961
The Income Tax Act, 2025, is largely a restructuring and renumbering exercise, with most penalty provisions continuing without major changes. Most penalty provisions are renumbered rather than substantially amended. Section 271AAC (unexplained income penalty) has been omitted. Crypto-asset reporting penalties were introduced under Section 446. The assessing officer becomes the primary penalty authority for several provisions previously handled by the joint commissioner. Relief provisions ("good and sufficient reasons") removed from certain cash transaction and digital payment-related penalties. And penalty rates largely remain unchanged, except for specified modifications in waiver/immunity provisions. Detailed Comparative Explanation of Major Penalty Provisions under the Income Tax Act, 1961 vs the Income Tax Act, 2025
1. Under-reporting / Misreporting of Income
|
Particulars |
ITA 1961 (Sec. 270A) |
ITA 2025 (Sec. 439) |
|
Under-reporting Penalty |
50% of tax payable on under-reported income |
50% of tax payable on under-reported income |
|
Misreporting Penalty |
200% of tax payable |
200% of tax payable |
Key Change
- A new category of misreporting has been introduced under Section 439(11)(g).
- Income referred to under Section 195(1)(b) is now specifically covered.
- Earlier exclusion available for certain search-related undisclosed income has been omitted.
- Penalty rates remain unchanged.
2. Immunity / Waiver from Penalty
|
Particulars |
ITA 1961 (Sec. 270AA) |
ITA 2025 (Sec. 440) |
|
Immunity available |
Yes |
Yes |
|
Tax & Interest Payment |
Mandatory |
Mandatory |
|
Additional tax for misreporting |
100% of tax on under-reported income |
100% for clauses (a) to (f); 120% for clause (g) |
Key Change
- For the newly added category of misreporting under Section 439(11)(g), waiver is available only after payment of 120% additional income-tax instead of 100%.
3. Failure to Maintain Books of Account
|
Particulars |
Sec. 271A |
Sec. 441 |
|
Nature of default |
Failure to keep/maintain books |
Same |
|
Penalty |
INR 25,000 |
INR 25,000 |
Key Change
- No substantive change.
- Only section reference changed from Section 44AA to Section 62 of the new Act.
4. Transfer Pricing Documentation Failure
|
Particulars |
Sec. 271AA |
Sec. 442 |
|
Failure to maintain TP documents |
2% of transaction value |
2% of transaction value |
|
Failure to furnish documents |
INR 5,00,000 |
INR 5,00,000 |
Key Change
- No change in penalty quantum.
- Section references have been renumbered.
5. Penalty on Unexplained Income
|
Particulars |
Sec. 271AAC |
ITA 2025 |
|
Penalty on income u/s 68 to 69D |
10% of tax payable u/s 115BBE |
Omitted |
Key Change
- Section 271AAC has not been carried forward into the Income-tax Act, 2025.
6. False Entry in Books of Account
|
Particulars |
Sec. 271AAD |
Sec. 444 |
|
False entries |
Penalty equal to amount involved |
Same |
|
Omitted entries |
Penalty equal to amount involved |
Same |
Key Change
- No substantive change.
- Definitions moved to a separate provision for better drafting clarity.
7. Failure to Get Accounts Audited
|
Particulars |
Sec. 271B |
ITA 2025 |
|
Audit default |
0.5% of turnover or INR 1,50,000 whichever lower |
Shifted to Section 428 |
Key Change
- Section 446 has been repurposed for Crypto Asset Reporting penalties.
- Audit penalty provision is now covered separately under Section 428.
8. Crypto Asset Reporting Defaults
|
Particulars |
ITA 1961 |
Sec. 446 |
|
Failure to furnish statement |
Not applicable |
INR 200 per day |
|
Inaccurate information |
Not applicable |
INR 50,000 |
Key Change
- Brand new compliance and penalty framework introduced for crypto-asset reporting.
9. Failure to Deduct / Pay TDS
|
Particulars |
Sec. 271C |
Sec. 448 |
|
Penalty |
Equal to tax not deducted/deposited |
Same |
Key Change
- Assessing Officer (AO) becomes the penalty authority.
- Earlier authority was Joint Commissioner.
10. Failure to Collect TCS
|
Particulars |
Sec. 271CA |
Sec. 449 |
|
Penalty |
Equal to tax not collected |
Same |
Key Change
- AO empowered to levy penalty.
- Penalty amount unchanged.
11. Violation of Cash Loan / Deposit Restrictions
|
Particulars |
Sec. 271D |
Sec. 450 |
|
Penalty |
Equal to loan/deposit received |
Same |
Key Change
- Only renumbering and change in authority.
- No change in penalty quantum.
12. Violation of Cash Receipt Restrictions
|
Particulars |
Sec. 271DA |
Sec. 451 |
|
Penalty |
Equal to receipt amount |
Same |
Key Change
- Relief available on proving "good and sufficient reasons" has been omitted.
13. Failure to Provide Prescribed Digital Payment Facility
|
Particulars |
Sec. 271DB |
Sec. 452 |
|
Penalty |
INR 5,000 per day |
INR 5,000 per day |
Key Change
- Defense of "good and sufficient reasons" removed.
- Penalty rate retained.
14. Violation of Cash Repayment Restrictions
|
Particulars |
Sec. 271E |
Sec. 453 |
|
Penalty |
Equal to repayment amount |
Same |
Key Change
- No substantive amendment.
15. Failure to Furnish Statement of Financial Transactions (SFT)
|
Particulars |
Sec. 271FA |
Sec. 454 |
|
Delay before notice |
INR 500/day |
Omitted |
|
Delay after notice |
INR 1,000/day |
INR 1,000/day |
|
Maximum Penalty |
No specific cap |
INR 1,00,000 cap |
Key Change
- Initial INR 500/day penalty removed.
- Maximum penalty restricted to INR 1 lakh.
16. Furnishing Inaccurate SFT
|
Particulars |
Sec. 271FAA |
Sec. 455 |
|
Penalty |
INR 50,000 |
INR 50,000 |
Key Change
- No substantive change.
- Additional INR 5,000 per inaccurate reportable account continues.
17. Failure to Furnish Foreign Asset / Offshore Information
|
Particulars |
Sec. 271GC |
Sec. 460 |
|
Delay up to 3 months |
INR 1,000/day |
INR 1,000/day |
|
Beyond 3 months |
INR 1,00,000 |
INR 1,00,000 |
Key Change
- No substantive amendment.
18. Incorrect Information by Professionals
|
Particulars |
Sec. 271J |
Sec. 463 |
|
Penalty |
INR 10,000 per report/certificate |
INR 10,000 per report/certificate |
Key Change
- No change in penalty amount.
- Applicable to accountants, merchant bankers and registered valuers.
19. Failure to Answer Queries / Furnish Information
|
Particulars |
Sec. 272A |
Sec. 465 |
|
Penalty per default |
INR 10,000 |
INR 10,000 |
Key Change
- No substantive change.
- Renumbering only.
20. Reasonable Cause Relief
|
Particulars |
Sec. 273B |
Sec. 470 |
|
Relief available if reasonable cause proved |
Yes |
Yes |
Key Change
- Relief continues.
- Certain sections newly added; some not carried forward.
21. Procedure for Imposition of Penalty
|
Particulars |
Sec. 274 |
Sec. 471 |
|
Show-cause notice mandatory |
Yes |
Yes |
|
Opportunity of being heard |
Yes |
Yes |
Key Change
- From 01.04.2027, penalty order under Section 439 may be incorporated in the assessment/reassessment order itself.
- Faceless penalty related provisions are omitted.
22. Time Limit for Penalty Order
|
Particulars |
Sec. 275 |
Sec. 472 |
|
Limitation |
Six months from relevant quarter |
Same |
Comparative table of major penalty provisions under the Income-tax Act, 1961 vis-à-vis the Income-tax Act, 2025.
|
Particulars |
IT Act, 1961 |
IT Act, 2025 |
Key Change |
|
Under-reporting / Misreporting of Income |
Sec. 270A |
Sec. 439 |
New misreporting category added; penalty remains 50% / 200% |
|
Immunity / Waiver from Penalty |
Sec. 270AA |
Sec. 440 |
Additional tax for waiver increased to 120% in specified cases |
|
Failure to Maintain Books of Account |
Sec. 271A |
Sec. 441 |
No substantive change; INR 25,000 penalty retained |
|
TP Documentation Failure |
Sec. 271AA |
Sec. 442 |
No substantive change; 2% of transaction value or INR 5 lakh |
|
Unexplained Income Penalty |
Sec. 271AAC |
Omitted |
Provision omitted from IT Act, 2025 |
|
False Entry in Books |
Sec. 271AAD |
Sec. 444 |
No change in quantum; penalty equal to false entry amount |
|
Failure to Get Accounts Audited |
Sec. 271B |
Moved to Sec. 428 |
No longer covered under Sec. 446 |
|
Crypto Asset Reporting Defaults |
Not Applicable |
Sec. 446 |
New provision; INR 200/day and INR 50,000 penalty |
|
Failure to Deduct / Pay TDS |
Sec. 271C |
Sec. 448 |
AO becomes penalty authority; quantum unchanged |
|
Failure to Collect TCS |
Sec. 271CA |
Sec. 449 |
AO becomes penalty authority; quantum unchanged |
|
Violation of Cash Loan/Deposit Rules |
Sec. 271D |
Sec. 450 |
Section renumbered; penalty unchanged |
|
Violation of Cash Receipt Rules |
Sec. 271DA |
Sec. 451 |
Relief for "good and sufficient reasons" omitted |
|
Failure to Provide Digital Payment Facility |
Sec. 271DB |
Sec. 452 |
Relief provision omitted; INR 5,000/day retained |
|
Violation of Cash Repayment Rules |
Sec. 271E |
Sec. 453 |
No substantive change |
|
Failure to Furnish SFT |
Sec. 271FA |
Sec. 454 |
INR 500/day penalty removed; INR 1,000/day after notice capped at INR 1 lakh |
|
Inaccurate SFT Reporting |
Sec. 271FAA |
Sec. 455 |
No substantive change; INR 50,000 retained |
|
Failure to Furnish Foreign Asset Information |
Sec. 271GC |
Sec. 460 |
No substantive change |
|
Incorrect Certificate by Professionals |
Sec. 271J |
Sec. 463 |
INR 10,000 per report retained |
|
Failure to Answer Queries / Furnish Information |
Sec. 272A |
Sec. 465 |
Penalty retained at INR 10,000 per default |
|
Reasonable Cause Relief |
Sec. 273B |
Sec. 470 |
Relief retained with modified section references |
|
Procedure for Penalty |
Sec. 274 |
Sec. 471 |
Penalty u/s 439 may form part of assessment order from 01.04.2027 |
|
Limitation for Penalty Orders |
Sec. 275 |
Sec. 472 |
No substantive change in time limits |
Key Change—Major Highlights of the New Act (2025): Executive Summary
Major Penalty Provisions—Executive Comparative Analysis
|
S. No. |
Penalty Provision |
IT Act, 1961 |
IT Act, 2025 |
Impact / Key Change |
|
1 |
Under-reporting / Misreporting of Income |
Sec. 270A |
Sec. 439 |
New 7th category of misreporting introduced; penalty remains 50% (under-reporting) and 200% (misreporting). |
|
2 |
Immunity / Waiver from Penalty |
Sec. 270AA |
Sec. 440 |
Additional tax increased from 100% to 120% for specified misreporting cases under Sec. 439(11)(g). |
|
3 |
Failure to Maintain Books of Account |
Sec. 271A |
Sec. 441 |
No substantive change. Penalty of INR 25,000 continues. |
|
4 |
Transfer Pricing Documentation Failure |
Sec. 271AA |
Sec. 442 |
No change. Penalty remains 2% of transaction value or INR 5 lakh. |
|
5 |
Unexplained Income Penalty |
Sec. 271AAC |
Omitted |
Penalty on income u/s 68 to 69D has not been carried forward. |
|
6 |
False Entries in Books |
Sec. 271AAD |
Sec. 444 |
Penalty equal to false/omitted entry amount continues. |
|
7 |
Failure to Get Accounts Audited |
Sec. 271B |
Shifted to Sec. 428 |
Audit penalty retained but relocated. Sec. 446 now covers crypto reporting. |
|
8 |
Crypto Asset Reporting Defaults |
Not Applicable |
Sec. 446 |
New provision: INR 200 per day and INR 50,000 penalty for inaccurate reporting. |
|
9 |
Failure to Deduct / Pay TDS |
Sec. 271C |
Sec. 448 |
AO replaces Joint Commissioner as penalty authority. Quantum unchanged. |
|
10 |
Failure to Collect TCS |
Sec. 271CA |
Sec. 449 |
AO replaces Joint Commissioner as penalty authority. |
|
11 |
Cash Loan / Deposit Violations |
Sec. 271D |
Sec. 450 |
No substantive change. Penalty equals amount accepted. |
|
12 |
Cash Receipt Violations |
Sec. 271DA |
Sec. 451 |
Relief for "good and sufficient reasons" omitted. |
|
13 |
Failure to Provide Digital Payment Facility |
Sec. 271DB |
Sec. 452 |
INR 5,000 per day retained; relief provision omitted. |
|
14 |
Cash Repayment Violations |
Sec. 271E |
Sec. 453 |
No substantive change. |
|
15 |
Failure to Furnish SFT |
Sec. 271FA |
Sec. 454 |
INR 500/day penalty removed; INR 1,000/day after notice capped at INR 1 lakh. |
|
16 |
Inaccurate SFT Reporting |
Sec. 271FAA |
Sec. 455 |
INR 50,000 penalty retained; INR 5,000 per inaccurate reportable account continues. |
|
17 |
Failure to Furnish Foreign Asset Information |
Sec. 271GC |
Sec. 460 |
No substantive change. INR 1,000/day or INR 1 lakh penalty continues. |
|
18 |
Incorrect Information by Professionals |
Sec. 271J |
Sec. 463 |
INR 10,000 per report/certificate retained. |
|
19 |
Failure to Answer Queries / Furnish Information |
Sec. 272A |
Sec. 465 |
INR 10,000 per default retained. |
|
20 |
Reasonable Cause Relief |
Sec. 273B |
Sec. 470 |
Relief continues with revised section references. |
|
21 |
Procedure for Imposition of Penalty |
Sec. 274 |
Sec. 471 |
Penalty u/s 439 may form part of assessment order from 01.04.2027. |
|
22 |
Limitation for Passing Penalty Orders |
Sec. 275 |
Sec. 472 |
Time limits substantially unchanged. |
The most notable changes are:
- Time-limit provisions substantially retained. Only section references updated.
- New misreporting category under Section 439.
- Higher immunity cost (120%) for specified misreporting cases.
- Introduction of Crypto Asset Reporting penalties.
- Omission of Section 271AAC penalty provision.
- AO becomes the primary authority for many penalties.
- Withdrawal of "good and sufficient reasons" defense in certain cash transaction penalties.
- SFT penalty regime rationalized with a INR 1 lakh cap
Conclusion
The Income-tax Act, 2025, is primarily a simplification, consolidation, and renumbering exercise. Most penalties are renumbered, not rewritten. Penalty quantum remains broadly unchanged across most provisions. The assessing officer becomes the principal penalty authority in several sections. Crypto-asset reporting emerges as a new compliance area. Reasonable cause protection is withdrawn in certain cash and payment-related defaults. SFT default penalties are rationalized with a maximum cap of INR 1 lakh. Procedural safeguards like hearing opportunity, show-cause notice, and limitation periods continue under the new regime. While the penalty architecture broadly mirrors the Income-tax Act, 1961, notable changes have been introduced in misreporting cases, immunity provisions, crypto-asset reporting, SFT compliance, and penalty administration. Following are major changes introduced by the Income Tax Act, 2025
|
Area |
Position Under ITA 2025 |
Significance |
|
Misreporting of Income |
New category added under Sec. 439(11)(g) |
Wider scope of penal consequences |
|
Waiver of Penalty |
120% additional tax required in specified cases |
More stringent immunity provisions |
|
Crypto Reporting |
New Sec. 446 introduced |
New compliance requirement for crypto ecosystem |
|
Section 271AAC |
Omitted |
Separate unexplained income penalty removed |
|
Penalty Authority |
AO empowered in several provisions |
Faster and streamlined administration |
|
Cash Receipt Violations |
Reasonable cause relief removed |
Stricter enforcement |
|
Digital Payment Defaults |
Reasonable cause relief removed |
Increased compliance responsibility |
|
SFT Penalty Structure |
Rationalized and capped at INR 1 lakh |
More certainty for reporting entities |
|
Penalty Orders |
May be embedded in assessment order from FY 2027-28 |
Procedural simplification |
