TaxTMI 
TaxTMI 
Enforcement of Information Disclosure in Cross-Border Transactions : Clause 462 of the Income Tax Bill, 2025 Vs. Section 271I of the Income-tax Act, 1961
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....ncome-tax Act, 1961, which prescribes similar penalties for non-compliance with information requirements u/s 195(6) of the 1961 Act. Both provisions are part of the broader legislative intent to ensure tax compliance, transparency, and effective administration of cross-border transactions, particularly those involving payments to non-residents. This commentary undertakes a detailed, clause-wise analysis of Clause 462, examining its legislative purpose, the precise scope and operation of its penalty mechanism, and its practical implications for taxpayers and tax administrators. Subsequently, the commentary provides a comparative analysis with Section 271I of the Income-tax Act, 1961, highlighting similarities, differences, and the evolving ....
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.... Detailed Analysis of Clause 462 of the Income Tax Bill, 2025 Textual Breakdown 462. If a person, who is required to furnish information u/s 397 (3)(d), fails to furnish such information, or furnishes inaccurate information, the Assessing Officer may impose a penalty of one lakh rupees. 1. Persons Covered The provision applies to any "person" required to furnish information u/s 397(3)(d). The term "person" is typically defined broadly under the Income Tax Act, 1961, and is expected to retain a similar scope in the 2025 Bill, encompassing individuals, companies, firms, associations of persons, bodies of individuals, and other juristic entities. 2. Nature of Information and Obligation The obligation arises u/s 397(3)(d), which presumabl....
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....Comparative Analysis with Section 271I of the Income-tax Act, 1961 Textual Comparison Section 271I: If a person, who is required to furnish information under sub-section (6) of section 195, fails to furnish such information; or furnishes inaccurate information, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one lakh rupees. A side-by-side comparison reveals that Clause 462 of the 2025 Bill is substantially modeled on Section 271I of the 1961 Act, with minor contextual modifications to align with the new legislative framework. Feature Clause 462 of the Income Tax Bill, 2025 Section 271I of the Income-tax Act, 1961 Triggering Provision Section 397(3)(d) Section 195(6) Nature of Defaul....
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....f the income tax law, potentially reflecting updated policy priorities and international best practices. * Procedural Nuances: The procedural framework for penalty imposition (such as timelines, appellate remedies, and waiver provisions) may differ between the two statutes, depending on the rules framed under the 2025 Bill. Comparative Policy Analysis The migration from Section 271I to Clause 462 signifies continuity in policy, with a focus on deterrence and compliance in international transactions. However, the opportunity to revisit the penalty regime in the 2025 Bill could have been used to introduce gradation based on the severity of default, provide for mitigation in cases of bona fide errors, or clarify the scope of "inaccurate in....
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.... For the tax administration, these provisions provide a clear statutory basis for penalizing non-compliance and misreporting, thereby strengthening enforcement. The fixed penalty structure simplifies administration and minimizes disputes over quantum. * However, the discretion implied by "may" requires the Assessing Officer to exercise judgment, potentially leading to requests for guidance or the development of administrative guidelines to ensure consistent application. Compliance and Procedural Considerations * Taxpayers must ensure that their systems and processes are capable of capturing and reporting all required information accurately and within prescribed timelines. This may necessitate investment in compliance infrastructure, pa....