Sections 456 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 456 to 460 of the Income-tax Act, 2025 are penalty sections for cross-border and fund reporting. They cover an eligible investment fund, a person who fails to furnish information under section 171, an Indian concern that fails to report under section 506, a reporting entity that fails to furnish the report required by section 511, and a person who fails to submit a statement under section 505. This article follows the text as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. The detail of each report is in the section that requires it and is not repeated here. For notices on international tax reporting, see our legal dispute resolution service.
Section 456: Rs. 5,00,000 for an eligible investment fund. Section 457: 2% of the value of the transaction. Section 458: 2% of the transaction's value if it transferred management or control, otherwise Rs. 5,00,000. Section 459: Rs. 5,000 a day (up to a month) then Rs. 15,000 a day for a late report, Rs. 50,000 a day after an order, and Rs. 5,00,000 for an inaccurate report in listed cases. Section 460: Rs. 1,000 a day for up to three months, otherwise Rs. 1,00,000.
Section 456: eligible investment fund
If any eligible investment fund required to furnish a statement or any information or document under paragraph 4 of Schedule I fails to do so within the time prescribed under that paragraph, the income-tax authority prescribed under that paragraph may direct that the fund pay, by way of penalty, Rs. 5,00,000.
The time and the statement are in paragraph 4 of Schedule I and are not explained here. The penalty is a single fixed sum; the section does not provide a daily penalty.
Section 457: information or document under section 171
If any person who has entered into an international transaction or specified domestic transaction fails to furnish any information or document as required under section 171(2), a penalty equal to 2% of the value of such transaction may be imposed on him for each such failure by the Assessing Officer, the Transfer Pricing Officer as referred to in section 166, or the Commissioner (Appeals).
The words "for each such failure" mean the penalty is counted per failure, not once per transaction. A related penalty for record-keeping appears in section 442, covered in our article on sections 441, 442, 444 and 445. For the transfer pricing rules see our post on section 161.
Example (amounts assumed). Orbit Tech Pvt Ltd entered into an international transaction of Rs. 2,00,00,000 and fails to furnish one required document under section 171(2). The penalty may be 2% x Rs. 2,00,00,000 = Rs. 4,00,000. If it failed to furnish a second item, "for each such failure" would support a second penalty, which the authority may impose.
Section 458: Indian concern, information under section 506
If any Indian concern required to furnish any information or document under section 506 fails to do so, the prescribed income-tax authority under that section may direct that the concern pay by way of penalty:
| Clause | Circumstance | Penalty |
|---|---|---|
| (a) | The transaction in respect of which the failure took place had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern | 2% of the value of the transaction |
| (b) | Any other case | Rs. 5,00,000 |
Example (amounts assumed). Malabar Foods Pvt Ltd, an Indian concern, fails to furnish information under section 506 about a Rs. 10,00,00,000 transaction that transferred management control. Clause (a) applies: 2% x Rs. 10,00,00,000 = Rs. 20,00,000. If the failure related to a transaction with no such effect, clause (b) gives Rs. 5,00,000.
Section 459: report under section 511
Sub-section (1): failure to furnish the report
If a reporting entity referred to in section 511, required to furnish the report referred to in section 511(2) for a reporting accounting year, fails to do so, the prescribed authority under that section may impose a penalty of:
- (a) Rs. 5,000 for every day for which the failure continues, if the period of failure does not exceed one month;
- (b) Rs. 15,000 for every day for which the failure continues beyond the period of one month.
Sub-sections (2) to (4)
| Sub-section | Default | Penalty |
|---|---|---|
| (2) | The reporting entity fails to produce information and documents within the period allowed under section 511(7) | Rs. 5,000 for every day during which the failure continues, beginning from the day immediately following the day on which the period expires |
| (3) | The failure in sub-section (1) or (2) continues after an order imposing a penalty under it has been served on the entity | Irrespective of those sub-sections, penalty of fifty thousand rupees for every day for which the failure continues, beginning from the date of service of the order |
| (4) | The reporting entity provides inaccurate information in the report furnished under section 511(2) | Rs. 5,00,000, if (a) the entity knew of the inaccuracy when furnishing the report but fails to inform the authority; (b) it discovers the inaccuracy after the report is furnished and fails to inform the authority and furnish the correct report within fifteen days of discovery; or (c) it furnishes inaccurate information or document in response to the notice under section 511(7) |
Section 511 is the provision that requires the report; the content of the report is not described here.
Example (days and amounts assumed). A reporting entity is 40 days late in furnishing the report. Under sub-section (1): the first month at Rs. 5,000 a day, taken as 30 days, is Rs. 1,50,000; the remaining 10 days at Rs. 15,000 is Rs. 1,50,000; total Rs. 3,00,000. After an order imposing that penalty is served, the failure continues for 5 more days; sub-section (3) allows fifty thousand rupees a day for those days, Rs. 2,50,000.
Section 460: statement under section 505
If any person required to furnish a statement under section 505 fails to do so within the period prescribed under that section, the Assessing Officer may impose a penalty of:
| Clause | Case | Penalty |
|---|---|---|
| (a) | The period of failure does not exceed three months | Rs. 1,000 for every day for which the failure continues |
| (b) | Any other case | Rs. 1,00,000 |
Example (days assumed). A person is 45 days late with a section 505 statement. Clause (a) applies: Rs. 1,000 x 45 = Rs. 45,000. If the failure runs beyond three months, clause (b) applies and the penalty is Rs. 1,00,000.
Comparison
| Section | Who | Penalty |
|---|---|---|
| 456 | Eligible investment fund | Rs. 5,00,000 |
| 457 | Person in default under section 171(2) | 2% of transaction value, for each failure |
| 458 | Indian concern, section 506 | 2% of value (management or control transfer), otherwise Rs. 5,00,000 |
| 459(1) | Reporting entity, late report | Rs. 5,000 a day up to a month; Rs. 15,000 a day beyond |
| 459(2), (3), (4) | Reporting entity, documents, continued default, inaccurate report | Rs. 5,000 a day; Rs. 50,000 a day; Rs. 5,00,000 |
| 460 | Person in default under section 505 | Rs. 1,000 a day up to three months; otherwise Rs. 1,00,000 |
The reasonable cause defence in section 470 lists sections 456 to 460 among those it covers; see our post on section 470. Where the penalty needs a hearing and approval, section 471 applies, and section 472 sets the time limit for the order; those are in our later article on sections 471 and 472.
Need help with a cross-border reporting penalty?
These penalties can build up quickly, daily in some cases and by transaction value in others. Our legal dispute resolution team reads the notice, the underlying report requirement and the defences before the hearing.
Key takeaways
- Each penalty is imposed by the authority named in the section, which "may" impose or direct it.
- Penalties are measured by transaction value (sections 457 and 458(a)), by fixed sum (456, 458(b), 459(4)) or by the day (459, 460).
- Section 459(3) raises the daily penalty to fifty thousand rupees if the default continues after an order is served.
- Section 459(4) penalises inaccurate reports in three situations, including a failure to correct within fifteen days of discovery.
- Section 470 includes these sections in its reasonable cause rule.
- The reports and statements are in sections 505, 506 and 511 and Schedule I, paragraph 4.
Read next
- Sections 461 to 464: penalties for statements, information under section 397 and incorrect reports or certificates
- Sections 448 to 453: penalties for failure to deduct or collect tax
- Section 470: the reasonable cause defence
- 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.