TaxTMI 
TaxTMI 
Ensuring Compliance Among Tax-Exempt Entities : Clause 464 of the Income Tax Bill, 2025 Vs. Section 271K of the Income-tax Act, 1961
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....#39;s intent to ensure timely and accurate compliance by entities that enjoy specific tax exemptions or benefits, particularly research associations, universities, colleges, and certain funds or institutions. This commentary provides a detailed analysis of Clause 464, exploring its objectives, legislative context, detailed provisions, and practical implications. It then undertakes a structured comparative analysis with Section 271K of the Income-tax Act, 1961, examining continuity and changes in the compliance regime, and concludes with a discussion on potential ambiguities, compliance challenges, and the way forward. Objective and Purpose The penalty provisions under Clause 464 and Section 271K are rooted in the policy objective of ensu....
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....n 45 of the Bill, which presumably corresponds to the current Section 35 of the 1961 Act (providing for deduction for expenditure on scientific research). * Institutions or Funds (Section 354): These are likely institutions or funds eligible for tax exemption or those that receive donations eligible for deduction under the new regime (analogous to Section 80G under the 1961 Act). 2. Triggering Events for Penalty The penalty is triggered by the failure to deliver or furnish prescribed documents/statements/certificates within the time limits or in the manner prescribed under the respective sections: * For entities u/s 45: Failure to deliver or furnish documents as prescribed u/s 45(4)(a). * For institutions or funds: Failure to delive....
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..../funds), both of which presumably lay down the substantive obligations to furnish prescribed statements and certificates. Comparative Analysis with Section 271K of the Income-tax Act, 1961 1. Structural Parallels Both Clause 464 and Section 271K are penalty provisions aimed at ensuring compliance with statement/certificate filing obligations by institutions/funds that enjoy tax benefits. Their structure is similar: * Minimum penalty: Rs. 10,000 * Maximum penalty: Rs. 1,00,000 * Discretionary power with Assessing Officer 2. Covered Entities Provision Entities Covered Section 271K * Research association, university, college, or other institution referred to in section 35(1)(ii), (iii), or company in (iia) * Institution or ....
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....r consideration of mitigating factors. 5. Procedural Safeguards and Overarching Principles Neither provision explicitly details procedural safeguards within the penalty clause itself. However, both are subject to the general penalty procedure under the respective Acts, including the right to be heard, appeals, and relief for reasonable cause (e.g., u/s 273B of the 1961 Act, which provides immunity from penalty for reasonable cause). 6. Legislative Evolution and Rationale Section 271K was introduced by the Finance Act, 2020, to address compliance gaps identified in the administration of tax benefits for scientific research and charitable donations. The transition to Clause 464 in the 2025 Bill reflects a continuity of this policy, with a....
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....d penalties. * Tax Professionals and Advisors: Need to familiarize themselves with the new section references and assist clients in navigating the transition. * Tax Authorities: Will need to ensure consistent application of the new provisions, provide clarificatory guidance, and exercise discretion judiciously in imposing penalties. Conclusion Clause 464 of the Income Tax Bill, 2025, represents a logical progression from Section 271K of the Income-tax Act, 1961, maintaining the core structure of penalties for non-compliance by institutions and funds with prescribed filing requirements. The principal changes are in the cross-references to substantive compliance provisions, reflecting a reorganization of the law. The penalty regime is d....