Union Budget 2026-27 - Finance Bill, 2026

Section 254 of the Income-tax Act, 2025 (hereinafter referred as ‘the Act’) provides the power to the income-tax authorities to collect information from the premises where business or profession is carried out, by directing the proprietor or employee or any other person, who may at that time and place, be attending in any manner to, or helping in, or carrying on of such business or profession, to furnish certain information as authorized.

2. Further, section 466 of the Act provides for a penalty if any person fails to comply with the provision of section 254, i.e. power to collect information, and does not furnish the requisite information to the authorized income-tax authorities. The section further gives power to Joint Commissioner, Deputy Director or Assistant Director or the Assessing officer to impose maximum penalty amounting to Rs. 1000/-.

3. In this regard, it has been considered that the maximum amount of penalty should be proportionate to create adequate deterrence and voluntary compliances.37

4. In view of the same, it is proposed to amend the section 466 of the Act so as to enhance the maximum amount of penalty to Rs. 25,000 from existing Rs. 1,000.

5. This amendment will take effect from the 1 st day of April, 2026 and shall apply for tax year 2026-27 and subsequent tax years.

[Clause 90]

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Full Text:

Union Budget 2026-27 - Finance Bill, 2026

Increase in penalty for failing to comply with tax information requests from business premises to strengthen compliance. Amendment to section 466 raises the maximum penalty for non-compliance with section 254 information directions from Rs. 1,000 to Rs. 25,000, to enhance deterrence and voluntary compliance. The enhanced sanction is to be imposed by specified tax officers and takes effect from 1 April 2026, applying to tax year 2026-27 and subsequent years.