Income Tax Act 2025: Section 454 for Tax Year 2026-27

Penalty for failure to furnish statement of financial transaction or reportable account

[Section-454 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 454(1) of Income Tax Act 2025

454(1) If a person who is required to furnish a statement of financial transaction or reportable account under section 508(1), fails to furnish such statement within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under the said sub-section (1) may impose on him, a penalty of five hundred rupees for every day during which such failure continues.

Section 454(2) of Income Tax Act 2025

454(2) If the person referred to in sub-section (1), fails to furnish the statement within the period specified in the notice issued under section 508(7), he shall pay penalty of one thousand rupees for every day during which the failure continues, beginning from the day immediately after the time specified in the such notice for furnishing the statement expires.

FAQs on Section 454 of Income Tax Act 2025

What is the penalty for failing to furnish a statement of financial transaction or reportable account under Section 454(1)?
A penalty of ₹500 per day is imposed for every day the failure continues beyond the prescribed time under Section 508(2).

Who imposes the penalty for failure to furnish the statement under Section 454(1)?
The income-tax authority prescribed under Section 508(1) has the power to impose the penalty.

What happens if the person also fails to comply with the notice under Section 508(7)?
As per Section 454(2), the penalty increases to ₹1,000 per day beginning from the day after the expiry of the time mentioned in the notice.

When does the higher penalty under Section 454(2) start applying?
It starts from the day immediately after the period specified in the Section 508(7) notice expires.

Is the penalty under Section 454 automatic or discretionary?
The income-tax authority has discretion to impose the penalty; it is not automatic.

Does the penalty apply separately under both sub-sections if both defaults occur?
Yes, if a person first fails to file within the time under Section 508(2) and then also fails to comply with a notice under Section 508(7), both penalties can apply — ₹500 per day initially and ₹1,000 per day after notice expiry.

Is there a cap on the total penalty amount under Section 454?
Section 454 does not prescribe any upper limit; the penalty continues to accumulate for each day of default.

Does the penalty apply even if the failure is unintentional or due to technical issues?
The section does not provide exceptions for unintentional or technical failures; the penalty applies for each day of default unless waived or reduced under other provisions by competent authority.

Is prior notice necessary before imposing penalty under Section 454?
The Act does not explicitly state that a separate notice is required for imposing the penalty under Section 454(1), but in practice, the assessee may be given an opportunity to be heard.

Can the penalty be appealed or contested?
Yes, penalties under the Income Tax Act, 2025 are generally appealable, subject to conditions specified elsewhere in the Act.