Section 43 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 43 deals with a person who has filed a return of income but has left out information, or given inaccurate particulars, about an asset or income outside India. The Assessing Officer may then direct a penalty of ten lakh rupees. This article reads the section as printed, sub-part by sub-part, and sets it beside section 42, which covers the person who files no return at all. For the filing side, see our income tax return filing service.
As per the Act as enacted and published in the Gazette of India on 27 May 2015, section 43 applies to a resident other than not ordinarily resident who has furnished a return but fails to furnish any information or furnishes inaccurate particulars about a foreign asset, a financial interest in a foreign entity, or foreign-source income. The Assessing Officer may direct a penalty of ten lakh rupees (as enacted). Bank accounts whose combined balance never went above a value equivalent to five hundred thousand rupees during the previous year are carved out by the proviso.
What the section says
Section 43 is a single paragraph, a proviso and an Explanation. Its marginal note in the Gazette is split over several lines; read together it is "Penalty for failure to furnish in return of income, an information or furnish inaccurate particulars about an asset (including financial interest in any entity) located outside India". The wording of that note is a little clumsy, and it is kept here as printed.
The section needs four things to be true together:
- The person is a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act.
- The person has furnished a return of income for a previous year under sub-section (1) or sub-section (4) or sub-section (5) of section 139 of the said Act.
- In that return the person fails to furnish any information, or furnishes inaccurate particulars, relating to an asset (including financial interest in any entity) located outside India, or relating to income from a source located outside India.
- The asset was held by him as a beneficial owner or otherwise, or he was a beneficiary of it, or the income arose, at any time during that previous year.
If all four are met, the Assessing Officer "may direct" that the person pay, by way of penalty, a sum of ten lakh rupees. The word is "may": the section gives a discretion to direct the penalty, and it prints a single fixed sum, not a range.
The double negative in "resident"
The words "a resident other than not ordinarily resident" read awkwardly. They mean a resident who is ordinarily resident: a person who is a resident and who is not in the "not ordinarily resident" class defined in clause (6) of section 6 of the Income-tax Act. Section 2(2) of this Act uses the same phrasing for an assessee. Our guides on residential status under section 6 and on the RNOR rules explain the income-tax tests.
Which returns are covered
The section names three sub-sections of section 139 of the Income-tax Act: (1), (4) and (5). Read plainly, these are the three ways a return can be on record: one filed under sub-section (1), one filed under sub-section (4), or one filed under sub-section (5). The Act does not describe those sub-sections here; it only cites them. The Act as enacted does not say, in this section, what happens to a person whose return is not on record under any of the three. That person is the subject of section 42, which speaks of failing to furnish the return before the end of the relevant assessment year.
For the reporting side, see our guide on foreign asset reporting in the return.
Section 43 and section 42 compared
| Point | Section 42 (as enacted) | Section 43 (as enacted) |
|---|---|---|
| Who | Resident other than not ordinarily resident | Same words |
| Trigger | Fails to furnish the return before the end of the relevant assessment year | Has furnished the return but fails to furnish information or furnishes inaccurate particulars |
| What must exist | A required return under section 139(1) or its provisos, and a foreign asset, beneficiary position or foreign-source income during the previous year | Foreign asset, beneficiary position or foreign-source income during the previous year, and a return under section 139(1), (4) or (5) |
| Penalty | Ten lakh rupees, if the Assessing Officer so directs | Ten lakh rupees, if the Assessing Officer so directs |
| Bank-account proviso | Aggregate balance not above a value equivalent to five hundred thousand rupees at any time during the previous year | Same proviso |
| Rate of exchange | Explanation to section 42 | Explanation to section 43 points back to the Explanation to section 42 |
You can read the earlier provision in our article on section 42.
The proviso on bank accounts
The proviso says that section 43 "shall not apply in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year". Three points follow from the words.
- It speaks of an aggregate: all the bank accounts taken together, not each account separately.
- It speaks of any time during the previous year: the test is the highest the combined balance reached, not the balance at year end.
- It covers only the asset that is bank accounts. A shareholding, a property or foreign income that has been left out of the return is not relieved by it.
The Explanation to section 43 says the value equivalent in rupees is determined in the manner provided in the Explanation to section 42. That Explanation uses the telegraphic transfer buying rate of the foreign currency as on the date for which the value is to be determined, as adopted by the State Bank of India constituted under the State Bank of India Act, 1955.
What "inaccurate particulars" and "fails to furnish any information" leave open
The Act as enacted does not define "inaccurate particulars" in section 43, and it does not say how much of a gap is enough. It does not say that an honest error is excused, nor that it is not. Section 45, on other defaults, uses the words "without reasonable cause", but those words do not appear in section 43. Draw no conclusion beyond the printed text, and take advice where the facts are borderline.
A worked example
Meera Nambiar, a resident ordinarily resident in India, files her return on time. During the previous year she held a brokerage account abroad with shares and also earned dividends from it. Her return mentions neither the shares nor the dividend. The combined balance in her only foreign bank account never went above the five hundred thousand rupee equivalent.
On the Act as enacted, the bank account falls within the proviso, but the shares and the dividend do not. Section 43 can apply because a return has been furnished and information about a foreign asset and foreign-source income is missing. The Assessing Officer may direct a penalty of ten lakh rupees. Whether it does so is a matter of discretion and of the procedure in Chapter IV, discussed in our article on sections 46 and 47.
Procedure that follows
Section 43 sits in Chapter IV. Section 46 says that, for imposing any penalty under that Chapter, the tax authority issues a notice to show cause, and no order imposing a penalty is made without an opportunity of being heard. Section 46(2) fixes the time for the notice only for penalties under sections 41 and 45; section 43 is not named there. Do not read anything into that silence beyond what the section says.
Section 43 and the prosecution provision
A person who wilfully fails to disclose a foreign asset in the return may face a separate prosecution provision, section 50. That is a different consequence, with a different test of wilfulness, and it is explained in its own article.
References and what to check
References to the Income-tax Act in this article are to the Income-tax Act, 1961 as printed in 2015; the corresponding provision of the current income-tax law should be checked. The figures above are "as enacted", and later Finance Act amendments to section 43 should be checked before anyone acts on them. Our guide on the Black Money Act and foreign asset disclosure is a companion read on the income-tax side.
Need help with foreign asset details in your return?
If you have filed a return and are unsure whether your foreign assets and income were reported fully, our team can review the position with you through our income tax return filing support and explain what the Act's provisions mean for your facts.
Key takeaways
- Section 43 applies after a return has been furnished; section 42 applies where no return is furnished in time.
- The trigger is failure to furnish information or furnishing inaccurate particulars about a foreign asset, a financial interest in a foreign entity, or foreign-source income.
- The penalty is ten lakh rupees, as enacted, and the Assessing Officer "may direct" it.
- The proviso covers only bank accounts whose aggregate balance never exceeded the five hundred thousand rupee equivalent at any time during the previous year.
- The rupee value of a foreign currency balance follows the Explanation to section 42.
- Check later Finance Act amendments before acting on any figure here.
Read next
- Section 42: penalty for not filing a return with foreign assets
- Sections 46 and 47: penalty procedure and limitation
- Section 50: prosecution for wilful non-disclosure of foreign assets
- Schedule FA in ITR: foreign assets and income reporting
Disclaimer: Based on the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as enacted and published in the Gazette of India on 27 May 2015, and on the Rules of 2015 as notified on 2 July 2015, as consulted on 2 October 2026. Later Finance Act amendments, amendment rules and the current income-tax law should be checked. This article is general information, not legal advice; check the official text before acting.