Penalty for failure to keep and maintain information and document, etc., in respect of certain transactions
[Section-442 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 442(1) of Income Tax Act 2025
442(1) The Assessing Officer or Commissioner (Appeals) may impose a penalty of 2% of the value of each international transaction or specified domestic transaction entered into by a person, if in respect of such transaction he,—
- 442(1)(a) fails to keep and maintain any such information and document as required by section 171(1);
- 442(1)(b) fails to report such transaction as he is required to do so; or
- 442(1)(c) maintains or furnishes an incorrect information or document.
Section 442(2) of Income Tax Act 2025
442(2) The prescribed income-tax authority referred to in section 171(4) may impose a penalty of five lakh rupees on a person, if he fails to furnish the information and document required under the said section.
FAQs on Section 442 of Income Tax Act 2025
What is the penalty under Section 442(1) for failure to maintain required information for international or specified domestic transactions?
A penalty of 2% of the value of each international transaction or specified domestic transaction may be imposed.
Who can impose the penalty under Section 442(1)?
The penalty can be imposed by the Assessing Officer or Commissioner (Appeals).
What are the circumstances under which the 2% penalty is imposed under Section 442(1)?
The penalty is imposed if a person:
(a) fails to keep and maintain information or documents required under Section 171(1);
(b) fails to report the transaction as required; or
(c) maintains or furnishes incorrect information or documents.
Does the 2% penalty apply per transaction or on total transactions?
The penalty applies on the value of each international transaction or specified domestic transaction.
What is the penalty under Section 442(2)?
A penalty of ₹5,00,000 may be imposed.
Who can impose the penalty under Section 442(2)?
The penalty can be imposed by the prescribed income-tax authority referred to in Section 171(4).
When is the ₹5,00,000 penalty imposed under Section 442(2)?
It is imposed when a person fails to furnish information and documents required under Section 171(4).
Is there a difference between penalties under Section 442(1) and 442(2)?
Yes. Section 442(1) deals with percentage-based penalties for failure to maintain/report information on a transaction level, while Section 442(2) imposes a flat penalty for failure to furnish information to the prescribed authority.
Can both penalties under Section 442(1) and 442(2) be imposed simultaneously?
Yes, if both types of failures occur — for example, if the taxpayer fails to maintain documents and also fails to furnish them when required.
Are these penalties mandatory or discretionary?
They are discretionary and may be imposed by the respective authorities based on the facts of the case.
What type of transactions are covered under this section?
International transactions and specified domestic transactions.
From when is Section 442 applicable?
Section 442 is applicable with effect from 1st April, 2026.
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