Income Tax Act 2025: Section 458 for Tax Year 2026-27

Penalty for failure to furnish information or document under section 506

[Section-458 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

If any Indian concern which is required to furnish any information or document under section 506, fails to do so, the prescribed income-tax authority under the said section, may direct that such Indian concern shall pay by way of penalty, a sum of—

(a) 2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern;

(b) five lakh rupees, in any other case.

FAQs on Section 458 of Income Tax Act 2025

What does Section 458 of the Income Tax Act, 2025 deal with?
Section 458 deals with the penalty imposed on an Indian concern that fails to furnish any information or document required under Section 506.

Who can impose the penalty under Section 458?
The prescribed income-tax authority under Section 506 has the power to impose the penalty.

What is the penalty if the failure to furnish information relates to a transaction transferring management or control?
In such cases, the penalty is 2% of the value of the transaction that had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern.

What is the penalty if the transaction does not involve transfer of management or control?
The penalty is five lakh rupees in cases where the failure relates to other types of transactions that do not involve transfer of management or control.

Is the penalty under Section 458 automatic upon failure?
No, the penalty is not automatic. It is imposed at the discretion of the prescribed income-tax authority.

Does Section 458 apply to all taxpayers?
No, it specifically applies to Indian concerns that are required to furnish information or documents under Section 506.

Is there any scope for reducing or waiving the penalty under Section 458?
Section 458 does not explicitly provide for waiver or reduction of penalty. Any such relief would depend on other applicable provisions or administrative discretion.

What kind of transactions are considered for the 2% penalty clause under Section 458?
Only those transactions that directly or indirectly result in the transfer of management or control of the Indian concern fall under the 2% penalty clause.

From when is Section 458 effective?
Section 458 is effective from 1st April, 2026.

Can a taxpayer challenge a penalty imposed under Section 458?
Yes, the taxpayer can challenge the penalty by following the appeal procedures provided under the Income Tax Act, 2025.