Penalty payable when tax in default
[Section-412 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 412(1) of Income Tax Act 2025
412(1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under section 411(3), be liable, by way of penalty, to pay—
- 412(1)(a) such amount as the Assessing Officer may direct; and
- 412(1)(b) in the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct.
Section 412(2) of Income Tax Act 2025
412(2) The total amount of penalty under sub-section (1) shall not exceed the amount of tax in arrears.
Section 412(3) of Income Tax Act 2025
412(3) No penalty under sub-section (1) shall be levied—
- 412(3)(a) unless the assessee has been given a reasonable opportunity of being heard; and
- 412(3)(b) where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons.
Section 412(4) of Income Tax Act 2025
412(4) The assessee shall not cease to be liable to any penalty under sub-section (1) merely by reason of the fact that before the levy of such penalty he has paid the tax.
Section 412(5) of Income Tax Act 2025
412(5) Where as a result of any final order the amount of tax, with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded.
FAQs on Section 412 of Income Tax Act 2025
What is the penalty under Section 412(1) of the Income Tax Act, 2025?
When an assessee is in default or is deemed to be in default in making a payment of tax, he is liable to pay a penalty in addition to the tax arrears and interest under Section 411(3). The penalty includes an amount as directed by the Assessing Officer and, in the case of continuing default, additional amounts as may be directed from time to time.
Who determines the penalty amount under Section 412(1)?
The Assessing Officer has the authority to determine the penalty amount.
What happens in the case of continuing default?
In the case of a continuing default, the Assessing Officer may impose further penalties from time to time.
Is there a limit on the total amount of penalty that can be imposed?
Yes, under Section 412(2), the total penalty cannot exceed the amount of tax in arrears.
Is the assessee given an opportunity before the penalty is levied?
Yes, as per Section 412(3)(a), no penalty can be levied unless the assessee has been given a reasonable opportunity of being heard.
Can the assessee avoid the penalty if there is a valid reason for the default?
Yes, under Section 412(3)(b), if the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons, no penalty shall be levied.
Will the payment of tax before penalty proceedings relieve the assessee from penalty?
No, according to Section 412(4), the assessee remains liable for penalty even if the tax is paid before the penalty is levied.
What happens to the penalty if the tax amount is later reduced to zero?
If a final order results in the entire tax amount being reduced, then as per Section 412(5), the penalty is cancelled and any penalty already paid is refunded.
Does the penalty apply automatically once there is a tax default?
No, the Assessing Officer must make a specific direction to impose the penalty and must ensure that principles of natural justice are followed, including giving the assessee an opportunity to be heard.
Can the penalty be imposed retrospectively?
No provision in Section 412 permits retrospective imposition of penalty. The penalty must relate to a default and must be imposed following due procedure under the Act.
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