Sections 441 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.
Chapter XXI sets out penalties for specific defaults. Sections 441, 442, 444 and 445 are the ones on keeping books, keeping transfer pricing records, making false or omitted entries, and applying a registered non-profit organisation's income for related persons. Section 443 is shown as omitted. This article follows the text as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. For help with a penalty notice, see our legal dispute resolution service.
Section 441: a penalty of Rs. 25,000 for failing to keep, maintain or retain books of account. Section 442: 2% of the value of each international or specified domestic transaction for record-keeping or reporting failures, and Rs. 5,00,000 for failing to furnish information and documents on a request. Section 444: a penalty equal to the aggregate amount of a false or omitted entry. Section 445: a penalty equal to, or 200% of, the income applied for the benefit of related persons by a registered non-profit organisation. Section 443 was omitted by the Finance Act, 2026.
Section 441: books of account
A penalty of Rs. 25,000 may be imposed on a person by the Assessing Officer, the Joint Commissioner (Appeals) or the Commissioner (Appeals), if he fails to:
- (a) keep and maintain the books of account and other documents as per section 62 or the rules made under it, in respect of any tax year; or
- (b) retain such books of account and other documents for the period specified in the said rules.
The word is "may": the penalty is discretionary. The books to be kept and the retention period come from section 62 and the rules; see our post on section 62. The detail is left to the Income-tax Rules, 2026.
Example (facts assumed). Mehta Garments, a firm required to maintain books under section 62 and the rules, cannot produce its books for a tax year. The Assessing Officer may impose a penalty of Rs. 25,000.
Section 442: information and documents on certain transactions
Sub-section (1): 2% of the transaction value
The Assessing Officer or Commissioner (Appeals) may impose a penalty of 2% of the value of each international transaction or specified domestic transaction entered into by a person, if in respect of such a transaction he:
| Clause | Default |
|---|---|
| (a) | Fails to keep and maintain any information and document as required by section 171(1) |
| (b) | Fails to report such transaction, which he is required to do |
| (c) | Maintains or furnishes an incorrect information or document |
Sub-section (2): Rs. 5,00,000
The prescribed income-tax authority referred to in section 171(4) may impose a penalty of Rs. 5,00,000 on a person if he fails to furnish the information and document required under that section.
Example (amounts assumed). Orion Components has two international transactions, valued at Rs. 3,00,00,000 and Rs. 1,50,00,000. It maintained the required documents for the first but not the second. Under sub-section (1) the penalty is per transaction in default: 2% x Rs. 1,50,00,000 = Rs. 3,00,000. The first transaction attracts no penalty under clause (a). If it also fails to furnish the information and document asked for under section 171(4), the authority may impose Rs. 5,00,000 under sub-section (2). For the transfer pricing provisions see our post on section 161.
Section 443: omitted
Section 443 has been omitted by the Finance Act, 2026, with effect from 1 April 2026. The Act prints the heading with the text shown as omitted. Nothing is explained here from the omitted text.
Section 444: false entry or omission in books
Sub-section (1): the person whose books are false
The Assessing Officer, the Joint Commissioner (Appeals) or the Commissioner (Appeals) may impose a penalty equal to the aggregate amount of the false or omitted entry, where during any proceeding it is found that in the books of account maintained by any person there is:
- (a) a false entry; or
- (b) an omission of any entry which is relevant for computation of total income of that person, to evade tax liability.
The words "to evade tax liability" appear after clause (b). As printed, they attach to the omission in clause (b); whether they also qualify a false entry in clause (a) is not stated in the text.
Sub-section (2): the person who causes it
Without prejudice to sub-section (1), the same authorities may impose a penalty equal to the aggregated amount of the false or omitted entry on any other person who causes the person in sub-section (1), in any manner, to make a false entry or omits, or causes to omit, any entry.
Sub-section (3): what a "false entry" includes
The expression "false entry" includes use or intention to use:
- forged or falsified documents such as a false invoice or, in general, a false piece of documentary evidence;
- an invoice for supply or receipt of goods or services, or both, issued by the person or any other person without actual supply or receipt; or
- an invoice for supply or receipt of goods or services, or both, to or from a person who does not exist.
Example (amounts assumed). In the course of a proceeding it is found that Pawan Traders recorded a purchase invoice of Rs. 8,00,000 from a supplier that does not exist. The penalty may equal the aggregate amount of the false entry, Rs. 8,00,000. If his accountant, Mr. Roy, caused him to make that entry, sub-section (2) allows a separate penalty of the same aggregate amount on Mr. Roy. Our post on section 439 covers the under-reporting penalty, which is a separate provision.
Section 445: benefits to related persons
If during any proceedings it is found that a person who is a registered non-profit organisation has any specified income chargeable to tax as per section 337 (Table: serial number 2), the Assessing Officer may impose a penalty of:
| Clause | Case | Penalty |
|---|---|---|
| (a) | The violation is noticed for the first time during any tax year | A sum equal to the aggregate amount of income applied, directly or indirectly, by such person for the benefit of any related person referred to in section 355(h) |
| (b) | The violation is noticed again in any subsequent tax year | A sum equal to 200% of the aggregate amount of income of such person applied, directly or indirectly, for the benefit of any person referred to in section 355(h) |
Section 355(h) defines the related persons; the definition is in that section and is not repeated here.
Example (amounts assumed). A registered non-profit organisation applies Rs. 2,00,000 of its income for the benefit of a related person within section 355(h). In the first tax year the violation is noticed: penalty = Rs. 2,00,000. In a later tax year the violation is noticed again, with Rs. 1,00,000 applied: penalty = 200% x Rs. 1,00,000 = Rs. 2,00,000.
Comparison
| Section | Who | Penalty |
|---|---|---|
| 441 | Any person who fails to keep, maintain or retain books | Rs. 25,000 |
| 442(1) | Person in default on a transaction | 2% of the transaction's value |
| 442(2) | Person failing to furnish information and document under section 171(4) | Rs. 5,00,000 |
| 444 | Person with a false or omitted entry; person causing it | Aggregate amount of the entry |
| 445 | Registered non-profit organisation | Amount applied; 200% on repeat |
For the Chapter see the Chapter XXI guide.
Need help with a penalty notice?
Penalties under these sections can be heavy compared with the underlying amount, and each depends on how the facts fit the clause. Our legal dispute resolution team reviews the notice, the records and the grounds for reply before the hearing.
Key takeaways
- Rs. 25,000 may be imposed for failing to keep, maintain or retain books under section 62 and the rules.
- A penalty of 2% of the value of each transaction applies to transfer pricing record-keeping and reporting failures; Rs. 5,00,000 applies on a failure to furnish information on request.
- A penalty equal to the aggregate amount of the false or omitted entry may be imposed on the person and on any person who caused it.
- A false entry includes forged documents and invoices without actual supply or from a non-existent person.
- A registered non-profit organisation faces a penalty equal to the income applied for related persons, and 200% on a repeat.
- Section 443 was omitted by the Finance Act, 2026.
Read next
- Section 440: waiver of penalty and immunity from prosecution
- Sections 446, 454 and 455: crypto-asset statements and statements of financial transaction
- Section 439: penalty for under-reporting
- Section 62: books of account
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.