Penalty for failure to comply with provisions of section 188
[Section-453 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
If a person repays any loan or deposit or specified advance referred to in section 188 otherwise than in accordance with the provisions of that section, the Assessing Officer may impose on him, a penalty equal to the loan or deposit or specified advance so repaid.
FAQs on Section 453 of Income Tax Act 2025
What is Section 453 of the Income Tax Act, 2025 about?
Section 453 deals with the penalty for failure to comply with the provisions of Section 188 concerning the repayment of loans, deposits, or specified advances.
When does Section 453 come into effect?
Section 453 is effective from 1st April, 2026.
What kind of transactions does Section 453 penalize?
It penalizes the repayment of any loan, deposit, or specified advance in a manner not compliant with Section 188.
Who is liable under Section 453?
Any person who repays the loan, deposit, or specified advance otherwise than in accordance with Section 188 is liable.
What is the quantum of penalty under Section 453?
The penalty is equal to the amount of the loan, deposit, or specified advance that was repaid in contravention of Section 188.
Who can impose the penalty under Section 453?
The Assessing Officer is empowered to impose the penalty under this section.
Is the penalty under Section 453 automatic?
No, the penalty is not automatic; it is imposed at the discretion of the Assessing Officer after examining the facts.
Does Section 453 apply to both individuals and entities?
Yes, it applies to any person, including individuals, firms, companies, or other entities who violate Section 188.
What is meant by “specified advance” under Section 453?
“Specified advance” refers to advances specified in Section 188, typically involving monetary transactions that are regulated under that section.
Can the penalty under Section 453 be contested?
Yes, a person can contest the penalty through the appeals mechanism provided under the Income Tax Act, 2025.
Is there a threshold limit for invoking Section 453?
No specific threshold limit is mentioned in Section 453; it applies to any amount repaid in violation of Section 188.
Is intent or mens rea required for penalty under Section 453?
Section 453 does not specify the requirement of intent; the mere act of repayment in violation of Section 188 is sufficient to attract penalty.
Does Section 453 provide any relief for genuine mistakes or clerical errors?
Section 453 itself does not provide relief for mistakes, but the Assessing Officer may consider the facts and circumstances before imposing a penalty.
Can penalty under Section 453 be levied in addition to other penalties?
Yes, it can be levied in addition to any other applicable penalties under the Income Tax Act, 2025.
What is the procedure followed by the Assessing Officer before levying the penalty under Section 453?
The Assessing Officer typically issues a notice and provides an opportunity of being heard before levying the penalty.
Does repayment through banking channels exempt a person from penalty under Section 453?
Repayment through banking channels is only relevant if it complies with the provisions of Section 188. If not, penalty under Section 453 may still apply.
Is there any exemption to Section 453 for certain classes of persons?
Section 453 does not mention any specific exemptions; all persons are expected to comply with Section 188.
Can a person voluntarily rectify the non-compliance to avoid penalty under Section 453?
Voluntary rectification does not absolve the person from liability under Section 453 once the violation has occurred.
