Income Tax Act 2025: Section 457 for Tax Year 2026-27

Penalty for failure to furnish information or document under section 171

[Section-457 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

If any person who has entered into an international transaction or specified domestic transaction fails to furnish any such information or document as required by section 171(2), a penalty equal to 2 % of the value of such transaction may be imposed upon him for each such failure by the Assessing Officer or the Transfer Pricing Officer as referred to in section 166 or the Commissioner (Appeals).

FAQs on Section 457 of Income Tax Act 2025

What does Section 457 of the Income Tax Act, 2025 deal with?
Section 457 prescribes the penalty for failure to furnish information or documents required under section 171(2) relating to international or specified domestic transactions.

Who is liable under Section 457?
Any person who has entered into an international transaction or a specified domestic transaction and fails to furnish the required information or documents under section 171(2) is liable.

What is the amount of penalty imposed under Section 457?
The penalty is equal to 2% of the value of each international or specified domestic transaction for which the required information or document is not furnished.

Who can impose the penalty under Section 457?
The penalty can be imposed by the Assessing Officer, the Transfer Pricing Officer referred to in section 166, or the Commissioner (Appeals).

Does the penalty under Section 457 apply per transaction or per instance of default?
The penalty applies for each such failure, which means it is calculated separately for each transaction for which information or documentation is not furnished.

Is there any discretion in imposing the penalty under Section 457?
Section 457 does not mention any discretion or exceptions; it mandates a penalty of 2% for each failure.

From which date is Section 457 effective?
Section 457 is effective from 1st April, 2026.

Is prior notice required before levying penalty under Section 457?
While Section 457 itself does not detail the procedure, general principles of natural justice under this Act would require that an opportunity to be heard is given before imposing any penalty.

What kind of transactions are covered under Section 457?
It covers both international transactions and specified domestic transactions as defined in the Income Tax Act, 2025.

What is meant by “such failure” in the context of Section 457?
“Such failure” refers to the non-furnishing of information or documentation required under section 171(2) regarding an international or specified domestic transaction.