Sections 44-45 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.
Sections 44 and 45 are the two "default" penalties in Chapter IV. Section 44 imposes a penalty equal to the tax arrear on an assessee who is in default in paying tax. Section 45 imposes a penalty of fifty thousand to two lakh rupees on a person who, without reasonable cause, fails to answer questions, sign statements or attend in response to a summons.
As per the Act as enacted and published in the Gazette of India on 27 May 2015, an assessee in default, or deemed to be in default, in paying tax is liable to a penalty equal to the tax arrear (section 44), and paying the tax later does not wipe the penalty out. A person who, without reasonable cause, fails to answer a question, sign a statement or attend or produce documents in answer to a summons under section 8 is liable to a penalty of not less than fifty thousand rupees and up to two lakh rupees (section 45), as enacted.
Section 44: penalty for default in payment of tax arrear
The marginal note reads "Penalty for default in payment of tax arrear". Section 44 has two sub-sections.
Sub-section (1). Every person who is an assessee in default, or an assessee deemed to be in default, as the case may be, in making payment of tax, and in case of continuing default by such assessee, is liable to a penalty of an amount equal to the amount of tax arrear. The printing of the sentence is a little compressed (the clause on "continuing default" has no separate verb), and the text is read here as printed: the amount of the penalty is the amount of the tax arrear.
Sub-section (2). An assessee does not cease to be liable to any penalty under sub-section (1) merely because, before the penalty is levied, he has paid the tax.
Three plain points follow.
- The measure is an amount equal to the tax arrear, not a percentage and not a range.
- The wording is "shall be liable", not "may direct". The Act as enacted does not use the Assessing Officer's discretion language that sections 41, 42 and 43 use.
- Sub-section (2) makes late payment an answer only to the tax, not to the penalty.
A demand that has already gone into default is a good point to take advice early; our legal dispute resolution service handles such matters.
The phrase "assessee in default" and "assessee deemed to be in default" is not defined in section 44 itself. The recovery sections of Chapter III use the same vocabulary; our article on recovery of tax dues by the Assessing Officer and Tax Recovery Officer explains the recovery side. The Act as enacted is silent in section 44 on how a default is declared, so read it with those sections.
The rules of procedure that apply
Section 46(1) requires a show-cause notice before any penalty under Chapter IV is imposed, and section 46(3) requires an opportunity of being heard. Section 46(2) fixes the time for the notice for penalties under sections 41 and 45 only; section 44 is not named there. Section 46(5) says every order of penalty is accompanied by a notice of demand, deemed to be a notice under section 13. The procedure is dealt with in our article on sections 46 and 47.
Section 45: penalty for other defaults
The marginal note reads "Penalty for other defaults". Sub-section (1) says a person shall be liable to a penalty if he has, without reasonable cause, failed to:
- (a) answer any question put to him by a tax authority in the exercise of its powers under this Act;
- (b) sign any statement made by him in the course of any proceedings under this Act which a tax authority may legally require him to sign; or
- (c) attend or produce books of account or documents at the place or time, if he is required to attend or to give evidence or produce books of account or other documents, at a certain place and time in response to summons issued under section 8.
Sub-section (2) says the penalty referred to in sub-section (1) shall be a sum which shall not be less than fifty thousand rupees but which may extend to two lakh rupees.
The three defaults tie back to the powers in section 8 (discovery and production of evidence, with a period of thirty days printed in that section) and to the proceedings before tax authorities described in section 9. See our article on sections 8 and 9 for the powers that give rise to these questions and summonses. The tax authorities themselves are named in section 6 and, for the purposes of section 8, in rule 4 of the Rules as notified on 2 July 2015.
"Without reasonable cause"
The defence is built into the section. If a person had a reasonable cause for not answering, not signing or not attending, the section does not apply. The Act as enacted does not say what counts as a reasonable cause, and this article does not supply a list. Whether a cause is reasonable depends on facts, and a person who cannot attend on the date fixed is generally better advised to say so, in writing and in time, than to stay silent.
Section 44 and section 45 at a glance
| Point | Section 44 (as enacted) | Section 45 (as enacted) |
|---|---|---|
| Marginal note | Penalty for default in payment of tax arrear | Penalty for other defaults |
| Who | Assessee in default, or deemed to be in default, in paying tax | A person who, without reasonable cause, fails to answer, sign or attend |
| Amount | An amount equal to the tax arrear | Not less than fifty thousand rupees, up to two lakh rupees |
| Effect of later payment | Does not end the penalty (sub-section (2)) | Not addressed |
| Time for the show-cause notice in section 46(2) | Not named in section 46(2) | Three years from the end of the financial year in which the default is committed |
| Order needing Joint Commissioner's approval (section 46(4)) | Applies to penalties under the Chapter when the money limits are crossed | Same |
A worked example for section 44
Arvind Kulkarni is assessed under the Act and a notice of demand is served. He does not pay by the date in the notice and the tax becomes an arrear of, say, twenty lakh rupees. On the Act as enacted, he is an assessee in default, and the penalty under section 44(1) is an amount equal to the tax arrear, twenty lakh rupees. If he pays the tax after a few weeks but before any penalty order is passed, section 44(2) says he is still liable to the penalty. What he has paid is credited against the tax, not against the penalty.
A worked example for section 45
Sunita Rao is summoned under section 8 to attend with her foreign bank statements on a given date. She does not attend and gives no reason. If no reasonable cause appears, section 45(1)(c) can apply, and the penalty is between fifty thousand and two lakh rupees as enacted. If she had been in hospital and sent word, the "without reasonable cause" words are where that fact would be argued.
Interaction with other penalties and with prosecution
Chapter IV is followed by Chapter V on offences. The Act as enacted says in section 48 that the provisions of Chapter V are in addition to, and not in derogation of, any other law providing for prosecution, and that they are independent of any order under the Act. Read the article on sections 48 and 49 for the prosecution that can follow wilful failure to file a return.
Appeal against a penalty order
For the appeal provisions of this Act, read sections 15 to 22 in our articles on appeals. Our guide on the parallel procedure under income-tax law, appeal to the CIT(A), describes the income-tax side only.
References and what to check
The sections of the Act named here are those printed in the Act as enacted. Later Finance Act amendments to sections 44 and 45 should be checked before acting. Any reference to the Income-tax Act is to the Income-tax Act, 1961 as printed in 2015; the corresponding provision of the current income-tax law should be checked.
Need help with a demand or a summons?
If you have received a notice of demand or a summons in a foreign-asset matter, our team can help you read it, plan your reply and, where needed, appear before the authority, through our legal dispute resolution service.
Key takeaways
- Section 44 penalty is an amount equal to the tax arrear, and paying the tax late does not remove it.
- Section 45 penalty is fifty thousand to two lakh rupees, as enacted, for failing without reasonable cause to answer, sign or attend.
- Section 45(1)(c) is tied to summons under section 8.
- Section 46 requires a show-cause notice and a hearing before any penalty under the Chapter.
- Check later Finance Act amendments before acting on any amount.
Read next
- Sections 46 and 47: penalty procedure and limitation
- Section 43: penalty for not disclosing foreign assets in the return
- Sections 8 and 9: powers of discovery and evidence
- Limitation period for filing suits and appeals
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.