Wilful attempt to evade tax, etc.
[Section-478 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 478(1) of Income Tax Act 2025
478(1) If a person wilfully attempts in any manner to evade payment of any tax, penalty or interest chargeable or imposable, or under-reports his income, under this Act, he shall be punishable,—
- 478(1)(a) in a case, where the amount sought to be evaded or tax on under-reported income exceeds twenty-five lakh rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and shall also be liable to fine;
- 478(1)(b) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and shall also be liable to fine,
and shall also be liable for penalty that may be imposable on him under any other provision of this Act.
Section 478(2) of Income Tax Act 2025
478(2) If a person wilfully attempts in any manner to evade the payment of any tax, penalty or interest under this Act, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and shall, in the discretion of the court, also be liable to fine.
Section 478(3) of Income Tax Act 2025
478(3) In addition to the punishment referred to in sub-section (2), the person referred to in the said sub-section shall also be liable for penalty that may be imposable on him under any other provision of this Act.
Section 478(4) of Income Tax Act 2025
478(4) For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act, or the payment thereof, shall include a case where any person—
- 478(4)(a) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
- 478(4)(b) makes or causes to be made any false entry or statement in such books of account or other documents; or
- 478(4)(c) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
- 478(4)(d) causes any other circumstance to exist which may have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.
FAQs on Section 478 of Income Tax Act 2025
What constitutes a wilful attempt to evade tax under Section 478 of the Income Tax Act, 2025?
A wilful attempt to evade tax includes actions like maintaining false records, making or causing false entries, omitting relevant statements, or creating circumstances intended to enable evasion of tax, penalty, or interest.
What is the punishment if the tax sought to be evaded exceeds ₹25 lakh?
If the amount of tax sought to be evaded or tax on under-reported income exceeds ₹25 lakh, the offender is punishable with rigorous imprisonment of not less than six months, which may extend to seven years, and shall also be liable to fine.
What is the punishment if the evaded tax amount is ₹25 lakh or less?
In such cases, the punishment is rigorous imprisonment for a term not less than three months but which may extend to two years, along with a fine.
Is the offender also liable to pay a penalty under other provisions of the Act?
Yes, in addition to imprisonment and fine, the person is also liable for any penalty that may be imposed under other provisions of the Act.
What does Section 478(2) cover specifically?
Section 478(2) covers wilful attempts to evade payment of any tax, penalty, or interest, and prescribes punishment of rigorous imprisonment from three months to two years, and a fine at the court’s discretion.
Does Section 478(3) impose any additional consequences?
Yes, it states that in addition to punishment under Section 478(2), the person shall also be liable for any applicable penalty under other provisions of the Act.
What are the illustrative actions considered as wilful evasion under Section 478(4)?
These include possessing or controlling books with false entries, making or causing false entries, omitting or causing omission of relevant entries, or creating any circumstance that facilitates evasion of tax, penalty, or interest.
Are both under-reporting of income and evasion of payment covered under Section 478?
Yes, both under-reporting of income and evasion of tax, penalty, or interest payment are punishable under Section 478.
Is intention or mens rea a necessary element under Section 478?
Yes, the term “wilfully” implies that the attempt to evade must be intentional or deliberate.
Does Section 478 apply even if the evasion attempt was not successful?
Yes, a wilful attempt in any manner, whether successful or not, is punishable under this section.
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