Sections 499 and 500 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 499 of the Income-tax Act, 2025 makes certain transfers of assets void against a tax claim, and section 500 lets the Assessing Officer attach property provisionally while an assessment or a large penalty proceeding is pending. Both are tools to stop revenue being defeated before it can be recovered. If you face an attachment order, our legal dispute resolution team can look at it with you.
This explanation is as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026. Under section 1(3) the Act came into force on the 1st April, 2026, save as otherwise provided. Later amendments, rules and notifications should be checked.
If an assessee creates a charge on, or parts with possession of, an asset while a proceeding is pending or after it is complete but before the Tax Recovery Officer's notice under section 413, the charge or transfer is void against the tax claim, unless it was for adequate consideration without notice or with the Assessing Officer's previous permission. Under section 500 the Assessing Officer may, with the Competent Authority's previous approval, attach property provisionally; the attachment ceases after six months unless extended, and it is revoked on a bank guarantee.
Section 499: certain transfers to be void
Sub-section (1): the rule
Where, during the pendency of any proceeding under the Act, or after its completion but before the Tax Recovery Officer serves notice under the procedure specified in section 413, an assessee creates a charge on, or parts with possession of, any of his assets in favour of another person, the charge or transfer is void against any claim for tax or any other sum payable by the assessee as a result of completion of the proceeding or otherwise.
Sub-section (2): when the transfer stays valid
The charge or transfer is not void if it is made:
- (a) for adequate consideration and without notice of the pendency of the proceeding or, as the case may be, without notice of the tax or other sum payable; or
- (b) with the previous permission of the Assessing Officer.
Sub-section (3): the limits
The section applies where the amount of tax or other sum payable or likely to be payable exceeds Rs. 5,000 and the assets charged or transferred exceed Rs. 10,000 in value. (The Act prints these as "` 5000" and "` 10000".)
Sub-section (4): meaning of assets and modes
"Assets" means land, building, machinery, plant, shares, securities, fixed deposits in banks and virtual digital asset, to the extent to which they do not form part of the stock-in-trade of the assessee's business. The modes of creating a charge on or parting with possession include sale, mortgage, gift, exchange or any other mode of transfer.
| Condition | Printed in section 499 |
|---|---|
| Tax or other sum payable or likely to be payable | Exceeds Rs. 5,000 |
| Value of assets charged or transferred | Exceeds Rs. 10,000 |
| Exception (a) | Adequate consideration, no notice of the proceeding or the sum |
| Exception (b) | Previous permission of the Assessing Officer |
Section 500: provisional attachment to protect revenue
Sub-section (1): when the power arises
The power can be exercised during the pendency of a proceeding for:
- (a) assessment of any income, or the assessment or reassessment of any income which has escaped assessment; or
- (b) imposition of penalty under section 444, where the penalty likely to be imposed exceeds two crore rupees.
If the Assessing Officer is of the opinion that it is necessary for protecting the interests of the revenue, he may, with the previous approval of the Competent Authority, by order in writing, attach provisionally any property of the assessee in the manner prescribed in section 413. For reassessment see our notes on section 279.
Sub-section (2) and (3): duration
Every provisional attachment ceases to have effect after six months from the date of the order. The Competent Authority may, for reasons recorded in writing, extend that period; the total extension shall not exceed two years or sixty days after the date of the order of assessment or reassessment, whichever is later.
Sub-sections (4) and (5): bank guarantee
Where the assessee furnishes a guarantee from a scheduled bank for an amount not less than the fair market value of the attached property, the Assessing Officer shall, by order in writing, revoke the attachment. Where he is satisfied that a guarantee for a lower amount is sufficient to protect the revenue, he may accept it and revoke the attachment.
Sub-sections (6) and (7): valuation and time to revoke
The Assessing Officer may refer the value of the attached property to the Valuation Officer, who estimates the fair market value in the manner provided in section 269(3) to (7) and reports within thirty days of the reference. An order revoking the attachment must be made:
- (a) within forty-five days from receipt of the guarantee, where a reference to the Valuation Officer has been made; or
- (b) within fifteen days from receipt of the guarantee, in any other case.
Sub-sections (8) to (10): invoking the guarantee
- If a notice of demand is served and the assessee fails to pay within the time specified, the Assessing Officer may invoke the guarantee, wholly or in part. For the demand notice see section 289.
- He shall invoke the guarantee in the interests of revenue if the assessee fails to renew it, or to furnish a new guarantee from a scheduled bank for an equal amount, before fifteen days of its expiry.
- The amount realised is adjusted against the existing demand; the balance is deposited in the Personal Deposit Account of the Principal Commissioner or Commissioner at a branch of the Reserve Bank of India or the State Bank of India, or of a bank appointed by the Reserve Bank of India as its agent under section 45(1) of the Reserve Bank of India Act, 1934 (2 of 1934), at the place where the office is situated. That Act is another law; check it separately.
Sub-sections (11) and (12): release and definition
When the Assessing Officer is satisfied that the guarantee is no longer needed to protect the revenue, he shall release it forthwith. "Competent Authority" means the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director.
| Time limit in section 500 | Period |
|---|---|
| Life of a provisional attachment | Six months from the order |
| Maximum extension | Two years or sixty days after the assessment or reassessment order, whichever is later |
| Valuation Officer's report | Thirty days from reference |
| Revocation order, with Valuation Officer reference | Forty-five days from receipt of guarantee |
| Revocation order, otherwise | Fifteen days from receipt of guarantee |
| Renewal of guarantee | Before fifteen days of its expiry |
A worked example (names and figures assumed)
Mr. Imran's assessment is pending, and tax of Rs. 8,00,000 is likely to be payable (an assumed figure). He sells a plot of land worth Rs. 30,00,000 (assumed) to a buyer who knows of the pending proceeding, for adequate consideration, without the Assessing Officer's permission.
- Section 499(3): the tax likely to be payable exceeds Rs. 5,000 and the asset exceeds Rs. 10,000, so the section applies.
- Exception (a) needs adequate consideration and no notice of the proceeding. The buyer had notice, so exception (a) is not met; no permission was taken, so exception (b) is not met either.
- The transfer is void against the tax claim under section 499(1).
Separately, suppose the Assessing Officer provisionally attaches another property of Mr. Imran, with the Competent Authority's approval, on 1 April. The attachment ceases after six months unless extended. If Mr. Imran furnishes a scheduled bank's guarantee for not less than the property's fair market value, the Assessing Officer must revoke it, within fifteen days of receipt if no Valuation Officer reference was made.
Need help with an attachment or recovery matter?
An attachment order or a question about a recent sale of property while an assessment is pending needs prompt, careful reading of dates and values. Our team at legal dispute resolution can review the order and guide you on guarantees and replies.
Key takeaways
- A charge or transfer made while a proceeding is pending, or after it ends but before the Tax Recovery Officer's notice, is void against the tax claim (section 499(1)).
- The exceptions are adequate consideration without notice, or the Assessing Officer's previous permission (section 499(2)).
- The section applies only above Rs. 5,000 of tax and Rs. 10,000 of assets (section 499(3)).
- Provisional attachment needs the Competent Authority's previous approval and a written order (section 500(1)).
- It ceases after six months, subject to recorded extensions (section 500(2), (3)).
- A bank guarantee from a scheduled bank leads to revocation (section 500(4), (5)).
Read next
- Sections 495 to 498: Special Courts for offences
- Sections 501 to 504: service and authentication of notices
- Section 289: notice of demand
- Chapter XXIII guide: miscellaneous provisions
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.