Sections 446 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.
Three penalty sections in Chapter XXI deal with reporting. Section 446 penalises a failure to furnish a statement on crypto-asset transactions, or furnishing inaccurate information in it. Section 454 penalises a failure to furnish a statement of financial transaction or reportable account after a notice. Section 455 penalises an inaccurate statement and a failure of due diligence. This article follows the text as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. Sections 446 and 454 were substituted by the Finance Act, 2026 (sections 101 and 103 of that Act), with effect from 1 April 2026; section 447 was omitted. If you have received a notice, see our legal dispute resolution service.
Section 446: Rs. 200 for every day of failure to furnish a crypto-asset statement under section 509(1), and Rs. 50,000 for inaccurate information not corrected or for a due diligence failure. Section 454: Rs. 1,000 a day after a notice under section 508(7), capped at Rs. 1,00,000. Section 455: Rs. 50,000 for an inaccurate statement or due diligence failure, plus Rs. 5,000 for every inaccurate reportable account in certain cases. Section 447 is omitted.
Section 446: crypto-asset transactions
Section 446 (substituted by the Finance Act, 2026) has two sub-sections.
| Sub-section | Default | Penalty |
|---|---|---|
| (1) | A person required to furnish a statement in respect of a transaction of a crypto-asset under section 509(1) fails to furnish it within the time prescribed under that section | The prescribed income-tax authority under that section may impose a penalty of Rs. 200 for every day for which the failure continues |
| (2)(a) | The person in sub-section (1) provides inaccurate information in the statement and fails to remove the inaccuracy as per section 509(4) | The prescribed income-tax authority may impose a penalty of Rs. 50,000 |
| (2)(b) | The person fails to comply with the due diligence requirement under section 509(5) | Rs. 50,000 |
The time for the statement, the authority and the details are those of section 509 and are left to the Income-tax Rules, 2026 where "as may be prescribed". The word is "may": the penalties are discretionary.
Example (amounts assumed). A platform operator, Zenith Exchange Pvt Ltd, is required to furnish a statement under section 509(1) and is 30 days late. Penalty under sub-section (1): Rs. 200 x 30 = Rs. 6,000. When it files, it gives inaccurate information and does not remove the inaccuracy as section 509(4) requires. The authority may also impose Rs. 50,000 under sub-section (2)(a).
Section 447: omitted
Section 447 has been omitted by the Finance Act, 2026, with effect from 1 April 2026. Nothing is explained from the omitted text. The failure to get accounts audited is dealt with by a fee in section 428(c); for section 428 see our post on the late filing fee and check the current text of that section.
Section 454: statement of financial transaction or reportable account after a notice
Section 454 (substituted by the Finance Act, 2026) applies where any person who is required to furnish a statement of financial transaction or reportable account under section 508(1) fails to furnish it within the period specified in the notice issued under section 508(7). The income-tax authority prescribed under section 508(1) may impose a penalty of Rs. 1,000 for every day for which the failure continues, beginning from the day immediately after the period specified in the notice expires. The penalty shall not exceed Rs. 1,00,000.
| Feature | Rule |
|---|---|
| Trigger | A notice under section 508(7) has been issued and the statement or reportable account is still not furnished within the period in the notice |
| Daily amount | Rs. 1,000 |
| Starting day | The day immediately after the period specified in the notice expires |
| Cap | Rs. 1,00,000 |
| Who imposes | The income-tax authority prescribed under section 508(1) |
A separate fee applies for delay in furnishing the statement within the original time (section 427(3)); see our article on sections 426, 427, 429 and 430.
Example (amounts and days assumed). A reporting entity receives a notice under section 508(7), allowing 15 days. It fails to furnish the statement even after the period expires and is 120 days late counting from the day after the period. Rs. 1,000 x 120 = Rs. 1,20,000, but the penalty cannot exceed Rs. 1,00,000. The cap is reached on the hundredth day.
Section 455: inaccurate statement of financial transaction or reportable account
Sub-section (1): Rs. 50,000
The prescribed income-tax authority referred to in section 508 may direct that a person required to furnish a statement under section 508(1) shall pay a penalty of Rs. 50,000 if he:
- (a) provides inaccurate information in the statement, or fails to furnish correct information within the period specified under section 508(8); or
- (b) fails to comply with the due diligence requirement under section 508(9).
Sub-sections (2) and (3): the reporting financial institution
Sub-section (2) says that the prescribed authority "shall direct" that a reporting financial institution referred to in section 508(1)(k) shall, in addition to the penalty under sub-section (1), if any, pay Rs. 5,000 for every inaccurate reportable account, if:
- the institution provides inaccurate information in the statement required under section 508(1); and
- the inaccuracy in the statement is due to false or inaccurate information furnished by the holder or holders of the relevant reportable account or accounts.
Sub-section (3): the institution is entitled to (a) recover the amount paid under sub-section (2) on behalf of the reportable account holder; or (b) retain an equal amount out of any moneys in its possession, or that may come to it, from every such account holder.
Note the difference in wording. Sub-section (1) is permissive ("may direct"); sub-section (2) is mandatory ("shall direct") once its two conditions are met.
Example (amounts assumed). Union Trust Finance, a reporting financial institution, files a statement with inaccurate information on 20 reportable accounts. For 8 of them, the inaccuracy was due to false information from the account holders. Sub-section (2) gives Rs. 5,000 x 8 = Rs. 40,000 (the 12 other accounts are outside sub-section (2) because the cause is not the holder's information). It may recover Rs. 5,000 from each of the 8 account holders, or retain it from moneys in its possession belonging to them. Separately, the authority may direct Rs. 50,000 under sub-section (1) if the statement is inaccurate and not corrected in the period under section 508(8).
Comparison
| Section | Default | Penalty |
|---|---|---|
| 446(1) | Late crypto-asset statement | Rs. 200 a day |
| 446(2) | Uncorrected inaccuracy; due diligence failure | Rs. 50,000 |
| 454 | No statement after a notice under section 508(7) | Rs. 1,000 a day up to Rs. 1,00,000 |
| 455(1) | Inaccurate statement; due diligence failure | Rs. 50,000 |
| 455(2) | Reporting financial institution, inaccuracy due to account holder | Rs. 5,000 per inaccurate reportable account |
The reporting regime itself is in sections 508 and 509, which are not covered in this article. For other penalty provisions see our post on sections 441, 442, 444 and 445.
Need help with a reporting notice?
These penalties run daily or per account, and the caps matter. Our legal dispute resolution team reviews the notice, the statement and the correction period and prepares the reply.
Key takeaways
- Section 446 (as substituted) charges Rs. 200 a day for a late crypto-asset statement and Rs. 50,000 for uncorrected inaccuracy or a due diligence failure.
- Section 447 is omitted by the Finance Act, 2026.
- Section 454 (as substituted) charges Rs. 1,000 a day after a section 508(7) notice, up to Rs. 1,00,000.
- Section 455 charges Rs. 50,000 for an inaccurate statement or due diligence failure, and Rs. 5,000 per inaccurate reportable account for a reporting financial institution when the account holder's information is the cause.
- The institution may recover that amount from, or retain it out of moneys of, the account holders.
- The statement rules are in sections 508 and 509.
Read next
- Sections 441, 442, 444 and 445: penalties for books of account, transfer pricing documents, false entries and benefits to related persons
- Sections 448 to 453: penalties for failure to deduct or collect tax and for breach of sections 185 to 188
- Sections 426, 427, 429 and 430: fees for statement defaults
- Chapter XXI: penalties
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.