TaxTMI 
TaxTMI 
Penalties for Reporting Non-Compliance by Resident constituent entity of an international group under Indian Tax Law : Clause 459 of the Income Tax Bill, 2025 Vs. Section 271GB of the Income-tax Act, 1961
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....s) and other designated reporting entities comply with their reporting obligations, thereby enabling tax authorities to access comprehensive and accurate information for risk assessment and effective taxation. Non-compliance, whether by omission or by furnishing inaccurate information, attracts significant monetary penalties, reflecting the seriousness with which such failures are viewed. This commentary provides a comprehensive analysis of Clause 459 of the Income Tax Bill, 2025, examining its structure, objectives, and practical implications. It then undertakes a detailed comparative analysis with Section 271GB of the Income-tax Act, 1961, highlighting similarities, differences, and the legal and policy considerations underlying any changes or continuities. The analysis is structured to facilitate a clear understanding of each provision and their collective contribution to the evolving landscape of tax administration in India. Objective and Purpose The legislative intent behind both Clause 459 and Section 271GB is to enforce compliance with statutory reporting requirements, specifically those relating to international tax matters. The provisions are designed to: * Ensure tim....
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....s to produce information or documents within the period specified u/s 511(7), a penalty of INR 5,000 per day is imposed for each day of continued default. The penalty accrues from the day immediately following the expiry of the stipulated period. This provision targets failures to cooperate with follow-up information requests, ensuring that entities cannot frustrate the information-gathering process by mere inaction or delay. 4. Sub-clause (3): Enhanced Penalty for Continued Failure If the failure under sub-clause (1) or (2) persists even after an order imposing the initial penalty has been served, the prescribed authority may impose a significantly enhanced penalty of INR 50,000 per day for each day of continued default, starting from the date of service of the penalty order. This escalation serves a dual purpose: it provides a strong deterrent against continued non-compliance and ensures that the cost of ongoing default far outweighs any perceived benefit of non-compliance. 5. Sub-clause (4): Penalty for Furnishing Inaccurate Information A penalty of INR 500,000 is imposed where a reporting entity furnishes inaccurate information in the report, and: * The entity had knowl....
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....logy and Drafting: Minor differences in language or structure may exist due to modernization or harmonization with the new Bill's drafting style, but the substantive content remains unchanged. * Contextual Alignment: Clause 459 is situated within a new legislative context, potentially accompanied by updated definitions, administrative procedures, or interpretive guidance elsewhere in the Bill. 3. Policy Continuity and Rationale The replication of Section 271GB's penalty regime in Clause 459 underscores the policy continuity in India's approach to international tax compliance and CbC reporting. It signals the government's intention to maintain a robust compliance and enforcement framework, even as the statutory architecture is modernized. The rationale for retaining the same penalty structure is clear: * Deterrence: The monetary penalties are set at levels that are significant enough to deter non-compliance, especially for large multinational entities. * Alignment with International Standards: The provisions are consistent with global best practices and the OECD BEPS framework, ensuring India's continued participation in international information exchang....
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....d later but did not correct within 15 days; (c) furnished inaccurate info in response to notice Rs. 5,00,000 under identical circumstances Identical in language and quantum Defenses/Exceptions No explicit provision No explicit provision Neither provision codifies reasonable cause or exceptions Discretionary Language "may impose" "may direct" Both confer discretion on the prescribed authority Procedural Safeguards Not specified Not specified Both silent; procedural rights may be governed by general principles or rules Observations: * Substantive Parity: Clause 459 is, in essence, a verbatim reproduction of Section 271GB, with changes only in the cross-referenced sections (511 vs. 286). * Continuity of Policy: The penalty regime remains unchanged in quantum, structure, and trigger events, indicating legislative intent to maintain the status quo under the new Code. * Potential for Expansion: The scope of reporting entities and reports u/s 511 of the new Bill may differ from section 286, potentially expanding or contracting the universe of entities subject to these penalties. * Absence of Additional Safeguards: The opportunity to introduce explicit ....