Income Tax Act 2025: Section 455 for Tax Year 2026-27

Penalty for furnishing inaccurate statement of financial transaction or reportable account

[Section-455 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 455(1) of Income Tax Act 2025

455(1) The prescribed income-tax authority referred to in section 508 may direct that a person required to furnish a statement under sub-section (1) of the said section shall pay penalty of fifty thousand rupees, if such person—

• 455(1)(a) provides inaccurate information in the statement or fails to furnish correct information within the period specified under section 508(8); or
• 455(1)(b) fails to comply with the due diligence requirement under section 508(9).

Section 455(2) of Income Tax Act 2025

455(2) The prescribed income-tax authority referred to in section 508, may direct that a reporting financial institution referred to in sub-section (1)(k) of the said section, shall, in addition to the penalty under sub-section (1) of this section, if any, pay a sum of five thousand rupees for every inaccurate reportable account, if––

• 455(2)(a) the said institution provides inaccurate information in the statement required to be furnished under section 508(1); and
• 455(2)(b) the inaccuracy in the said statement is due to false or inaccurate information furnished by the holder or holders of the relevant reportable account or accounts.

Section 455(3) of Income Tax Act 2025

455(3) The reporting financial institution shall be entitled to––

• 455(3)(a) recover the amount paid under sub-section (2) on behalf of the reportable account holder; or
• 455(3)(b) retain an amount equal to the sum so paid out of any moneys that may be in its possession, or may come to it from every such account holder.

FAQs on Section 455 of Income Tax Act 2025

What is the penalty for furnishing inaccurate information in a financial statement under Section 455(1)?
The penalty is fifty thousand rupees if a person required to furnish a statement under Section 508(1) provides inaccurate information or fails to provide correct information within the specified period or fails to meet due diligence requirements.

Who can impose the penalty under Section 455?
The prescribed income-tax authority referred to in Section 508 has the power to impose the penalty.

What triggers the penalty under Section 455(1)(a)?
The penalty is triggered if a person provides inaccurate information in the statement or does not furnish correct information within the time specified under Section 508(8).

What triggers the penalty under Section 455(1)(b)?
The penalty is also applicable if the person fails to comply with the due diligence requirements laid out in Section 508(9).

What additional penalty applies specifically to reporting financial institutions?
Under Section 455(2), a reporting financial institution must pay an additional penalty of five thousand rupees for every inaccurate reportable account.

When is the additional penalty under Section 455(2) imposed?
It is imposed when the institution furnishes inaccurate information in the required statement and the inaccuracy results from false or inaccurate information provided by the holder(s) of the account.

Can the reporting financial institution recover the additional penalty from the account holders?
Yes, as per Section 455(3), the institution can recover the amount paid as penalty from the reportable account holder or retain an equivalent amount from funds in its possession related to the account holder.

Is the additional penalty in Section 455(2) separate from the penalty in Section 455(1)?
Yes, the penalty under Section 455(2) is in addition to any penalty imposed under Section 455(1).

What is meant by “reporting financial institution” in this context?
It refers to the financial institutions defined under Section 508(1)(k) that are required to furnish specified statements.

Does the source of the inaccuracy affect the penalty for reporting financial institutions?
Yes, the additional penalty under Section 455(2) is specifically applicable only if the inaccuracy is due to false or inaccurate information from the account holder(s).