Beyond Amendment - The Policy Philosophy Driving Clause 83
In recent years, tax compliance has undergone a significant transformation. The system has gradually shifted from rigid enforcement to a more facilitative and technology-driven compliance framework. The Finance Bill, 2026, continues this reform journey by extending the timelines for filing and revising returns under Clause 57, thereby providing taxpayers with greater flexibility to correct errors and ensure accurate reporting. However, legislative flexibility must be accompanied by compliance discipline. Extended timelines should not encourage complacency or delay in reporting obligations.
Clause 83 seeks to maintain this delicate balance. It proposes to substitute Sections 427 and 428 of the Income-tax Act, 2025, as proposed under Clause 83 of the Finance Bill, 2026. The proposal conveys a clear legislative intent that, while the law supports taxpayers by providing extended opportunities, it also expects timely and responsible compliance. Facilitation and accountability are therefore designed to operate together to strengthen the reliability and stability of the compliance framework.
Strengthening Compliance Discipline Through Fee Provisions
(Clause 83 of the Finance Bill, 2026)
Clause 83 complements the extended return-filing framework introduced under Clause 57 by strengthening the fee structure for delays and reporting defaults. The provision seeks to consolidate and rationalise fee consequences relating to the delayed filing of returns, audit reports, specified accountant certifications, and reporting statements. The objective is not to restrict taxpayer rights but to ensure that the additional time granted by law is utilised responsibly and within a structured compliance environment.
The amendment therefore substitutes Sections 427 and 428 of the Income-tax Act, 2025, prescribing proportionate and clearly defined fee consequences for specified reporting failures. The relevant substituted provisions are reproduced below for ready reference:
83. For sections 427 and 428 of the Income-tax Act , the following sections shall be substituted, namely: ––
"427
(1) Without prejudice to the provisions of this Act, where any person fails to deliver or cause to be delivered a statement as per section 397(3)(b) within the time prescribed therein, he shall be liable to pay by way of fee, a sum of ₹ 200 for every day for which such failure continues.
(2) The amount of fee referred to in sub-section (1) shall– (a) not exceed the amount of tax deductible or collectible; and (b) be paid before delivering or causing to be delivered the statement, as per sub-section (1).
(3) Without prejudice to the provisions of this Act, where any person who is required to furnish a statement of financial transaction or reportable account under section 508(1), fails to furnish such statement within the time prescribed under section 508(2), he shall be liable to pay by way of fee, a sum of ₹ 200 for every day for which such failure continues and such fee shall not exceed a sum of ₹ 100000.
428. Without prejudice to the provisions of this Act, where any person
(a) required to furnish a return of income under section 263, fails to do so within the due date, as specified under sub-section (1) of the said section, he shall be liable to pay by way of fee, –– (i) a sum of ₹ 1000, if the total income of such person does not exceed ₹ 500000; and
(ii) a sum of ₹ 5000, in any other case;
(b) furnishes a return of income under section 263(5) beyond nine months from the end of relevant tax year, he shall be liable to pay by way of fee, ––
(i) a sum of ₹ 1000, if the total income of such person does not exceed ₹ 500000; and
(ii) a sum of ₹ 5000, in any other case;
(c) fails to get his accounts audited for any tax year or years and furnish the report of such audit as required under section 63, he shall be liable to pay by way of fee, ––
(i) a sum of ₹ 75000 for a delay up to one month for which such failure continues; and
(ii) a sum of ₹ 150000 thereafter;
(d) fails to furnish a report from an accountant as required by section 172, he shall be liable to pay by way of fee, ––
(i) a sum of ₹ 50000 for a delay up to one month for which such failure continues; and
(ii) a sum of ₹ 100000 thereafter”
A careful reading of the substituted provisions shows that the amendment establishes a comprehensive and structured fee framework for specific reporting defaults. The scope and practical implications of these provisions are discussed below, beginning with substituted Section 427, which deals with fee consequences for delays in furnishing prescribed statements and financial transaction reports.
Substitution of Section 427 with effect from April, 2026– Fee for Delay in Furnishing Statements and Financial Transaction Reports
Substituted Section 427 introduces a structured and calibrated fee framework for delays in furnishing specified compliance statements. The provision primarily governs two crucial reporting obligations — periodic withholding tax statements and statements of financial transactions or reportable accounts. These reporting mechanisms form the backbone of the modern information-driven tax administration system, where accurate, timely data enables seamless tax credit flows, risk-based assessments, and early detection of compliance gaps.
Section 427(1) prescribes a fee of ₹200 per day where a person fails to furnish a statement required under Section 397(3)(b) within the prescribed time. Section 397 governs the obligation to furnish statements relating to tax deduction or tax collection at source. Clause (3)(b) of Section 397 specifically requires every person responsible for deducting or collecting tax to furnish periodic statements containing detailed transactional information, such as the amount of tax deducted or collected, particulars of deductees or collectees, nature and timing of payments, and other prescribed compliance particulars.
These statements serve a critical function in the tax ecosystem. They facilitate automatic reflection of tax credit in the taxpayer’s account and enable the tax administration to verify whether withholding obligations have been correctly discharged. Any delay in providing such statements can disrupt credit availability for taxpayers and create reconciliation issues within the system. Recognising the importance of disciplined, time-bound compliance behaviour, the law prescribes a daily fee mechanism to encourage punctual compliance. At the same time, the provision maintains fairness by restricting the total fee to the amount of tax deductible or collectible and by mandating payment of such fee before submission of the delayed statement.The practical implications of these provisions can be illustrated as follows:
Illustration 1: Delay in Furnishing the Withholding Tax Statement
Aayra Ltd. deducts tax of ₹10,000 during a quarter and is required to furnish the prescribed statement under Section 397(3)(b) within the stipulated due date. Due to internal system migration issues, the statement is furnished 20 days after the due date.
The fee under Section 427(1) is ₹200 per day for 20 days, totalling ₹4,000. Since the calculated fee does not exceed the amount of tax deducted, the entire fee of ₹4,000 shall be payable. The fee must be paid before the delayed statement is furnished .
Illustration 2: Delay in Furnishing the Withholding Tax Statement
Anish Ltd. deducts tax of ₹10,000 during a quarter and is required to furnish the prescribed statement under Section 397(3)(b) within the stipulated due date. Owing to internal data reconciliation issues, the statement is furnished 60 days after the due date.
The fee under Section 427(1) is ₹200 per day for 60 days, totalling ₹12,000. However, because the law requires the fee not exceed the amount of tax deductible or collectible, the fee is limited to ₹10,000. The ₹10,000 fee must be paid before submitting the delayed statement.
Delay in Furnishing Statement of Financial Transactions - Section 508
Section 427(3) addresses delays in furnishing statements of financial transactions or reportable accounts as mandated under Section 508 . This provision is a cornerstone of the government’s data analytics-based compliance-monitoring framework. Section 508 requires specified reporting entities such as banks, financial institutions, companies, registrars, and other notified persons to report high-value or specified financial transactions undertaken by taxpayers.
Such reportable transactions may include large cash deposits, high-value property purchases, substantial investments, significant credit card payments, or certain reportable domestic or international financial accounts. The objective of this reporting mechanism is to provide the tax administration with a comprehensive financial activity trail that helps detect undisclosed income, strengthen risk assessment models, and improve voluntary compliance through data-based verification.
Where a reporting entity fails to furnish such statements within the prescribed time under Section 508(2), Section 427(3) imposes a fee of ₹200 per day for the period of delay. Recognising that these statements often involve extensive data compilation and system-generated reporting, the law prescribes a ceiling of ₹1,00,000 to ensure proportionality and administrative fairness.
Illustration 3: Delay in Furnishing Statement of Financial Transaction under Section 508
Punjab National Bank is required to furnish a statement of specified financial transactions under Section 508 within the prescribed due date for the relevant financial year. Due to data reconciliation issues, the bank furnishes the statement 600 days after the due date.
The fee under Section 427(3) will be ₹200 per day for 600 days, amounting to ₹1,20,000. However, since the law prescribes that the fee shall not exceed ₹1,00,000, the fee is limited to ₹1,00,000. The restricted fee must be paid before the delayed statement is furnished.
Rationalisation under the New Legislative Framework
While earlier compliance regimes also prescribed consequences for delayed reporting, the substituted Section 427 reflects a more structured and transparent approach. The provision clearly categorises reporting defaults, prescribes uniform daily fee rates, and incorporates reasonable caps to ensure proportionality. The shift indicates a move away from fragmented penalty-based provisions towards predictable, standardised fee mechanisms that emphasise compliance discipline without introducing excessive litigation exposure.
The revised framework also supports the government’s move towards technology-based compliance. It establishes uniform fee rules and directly links them to reporting delays. This encourages taxpayers and reporting entities to use automated systems and stronger internal controls. As a result, manual errors are reduced, and reporting becomes more accurate
Legislative Intent - From Enforcement to Information Integrity
Viewed holistically, Section 427 reflects the evolution of tax administration towards an information-centric compliance ecosystem. Timely reporting helps the compliance system run smoothly. It ensures accurate recording of tax credits and supports effective, risk-based verification by the tax department.
The provision therefore reinforces disciplined reporting behaviour while preserving proportional compliance consequences. It provides reasonable opportunities for compliance while imposing moderate fees for delays . The aim is to encourage timely reporting without making the law excessively harsh or punitive.
While Section 427 strengthens the information reporting framework, the compliance journey remains incomplete without disciplined return filing and certification compliance. Section 428, therefore, expands the fee framework to core income reporting obligations.
From Reporting Discipline to Return Compliance
Substitution of Section 428 with effect from April, 2026 – Consolidated Fee Framework for Return and Audit Related Defaults
While Section 427 addresses fee consequences for delays in furnishing prescribed statements and financial transaction reports, the substituted Section 428 establishes a broader, more comprehensive fee framework that covers defaults relating to return filing, revised returns, audit reporting, and accountant certifications. Each clause of Section 428 addresses a specific reporting obligation. It prescribes graded fee consequences depending upon the nature and duration of the default. The scope and practical implications of these provisions are discussed below.
Fee for Delay in Furnishing the Return of Income-Section 428(a)
Under this provision, a fee becomes payable if a taxpayer fails to furnish the return of income by the due date prescribed under Section 263(1 ). Section 263(1)sets different due dates based on the taxpayer's nature and the complexity of reporting obligations. These statutory timelines are structured as follows:
Category 1 - Due Date: 30th November
This category covers cases where the return filing due date is linked to situations in which reporting or certification requirements under Section 172 apply. These cases usually involve special reporting or certification requirements that require additional verification and documentation. Under the proposed amendment, taxpayers in this category will be required to file their return of income by 30th November of the year immediately following the relevant tax year.The purpose of granting the longest timeline to this category is to ensure that taxpayers with specialised compliance requirements can complete their reporting properly.
Category 2 - Due Date: 31st October
This category covers the following taxpayers:
(A) Companies
(B) Taxpayers whose accounts are required to be audited
(C) Partners of firms where audit is mandatory
(D) Spouses of such partners in specified situations
For these taxpayers, the due date for filing the return of income will remain 31st Octoberof the year immediately following the relevant tax year.The reason for retaining this date is that taxpayers subject to audit cannot finalise their taxable income until the audit is completed. The audit process includes verifying the books of account, preparing audit reports, and ensuring compliance with accounting standards. Therefore, a later due date is necessary for proper compliance.
Category 3 - Due Date: 31st August
This category is the most important relief provided by the amendment. It covers:
(A) Taxpayers having income from a business or profession whose accounts are not required to be audited
(B) Partners of such firms
(C) Spouses of such partners in specified cases
This extension recognises that, even when an audit is not mandatory, business taxpayers still need time to finalise accounts and complete reconciliation procedures.
Category 4 - Due Date: 31st July
This category covers all other taxpayers, such as salaried individuals and persons having relatively simple income structures. For these taxpayers, the due date remains 31st July of the year immediately following the relevant tax year, as preparingthe return in such cases generally does not involve complex accounting procedures.
Where a taxpayer fails to furnish the return of income within the applicable due date, Section 428(a) prescribes a fee linked to the taxpayer’s total income. Where the total income does not exceed ₹5,00,000, the fee payable is ₹1,000. In all other cases, the fee payable is ₹5,000.
This provision highlights the legislative emphasis on the timely filing of income tax returns. While Clause 57 rationalises and extends certain compliance timelines, Section 428(a) ensures that taxpayers remain vigilant in following the structured return filing calendar. The fee mechanism is intended to encourage disciplined compliance rather than impose an excessive penalty burden.
Illustration 4: Fee for Delay in Filing the Return of Income
Prem Kapoor is engaged in business, and his accounts are required to be audited under the Income-tax Act, 2025. Accordingly, he is required to furnish his return of income by 31st October 2027 under Section 263(1). If he furnishes his return after the prescribed due date and his total income exceeds ₹5,00,000, he shall be liable to pay a fee of ₹5,000 under Section 428(a). The prescribed fee must be paid before furnishing the delayed return.
Fee for Filing Revised Return Beyond Nine Months - Section 428(b)
This provision operates as a consequential compliance mechanism linked to the revised return facility under Section 263(5), which is also proposed to be amended vide Finance Bill, 2026. Under the amended Section 263(5) a taxpayer may file a revised return within 12 months of the end of the relevant tax year, or before the assessment is completed, whichever is earlier.
While the law now permits filing a revised return within 12 months of the end of the relevant tax year, a fee applies if the revised return is filed more than 9 months after the end of the tax year.The fee structure remains income-based. Where the total income does not exceed ₹5,00,000, the fee payable is ₹1,000. In all other cases, the fee payable is ₹5,000. The purpose of this provision is to encourage taxpayers to utilise the revised return facility at the earliest opportunity, to avoid unnecessary delay, while preserving the extended revision window granted under Clause 57.
Illustration 5 - Fee Trigger on Late Filing of Revised Return
Sonica Jaggi furnishes her original return of income on or before the due date prescribed under Section 263(1). Subsequently, she discovers that certain income was inadvertently omitted from the return. She is therefore eligible to furnish a revised return in accordance with the provisions of the Act.
If Sonica Jaggi furnishes the revised return within nine months from the end of the relevant tax year, no fee shall be payable under Section 428(b). However, if she furnishes the revised return after the expiry of nine months but within twelve months from the end of the relevant tax year, she shall be liable to pay the prescribed fee under Section 428(b), subject to the income-based fee limits specified therein.
This provision permits taxpayers to correct genuine errors while simultaneously encouraging early rectification of omissions through a graded fee structure.
Fee for Failure to Furnish Audit Report - Section 428(c)
Section 428(c) establishes a graduated fee structure for failure to obtain an audit of accounts and furnish the audit report as required under Section 63. Before understanding the fee consequences, it is important to briefly appreciate the scope and significance of Section 63, which governs audit requirements under the Income-tax Act, 2025.
Section 63 mandates that specified taxpayers whose business or professional activities exceed prescribed monetary thresholds must have their accounts audited by a qualified accountant and furnish an audit report by the prescribed due date. The provision is designed to ensure that taxpayers maintaining large or complex financial transactions present their accounts in a verified and standardised format. The audit process involves examining the books of account, verifying financial records, confirming compliance with statutory provisions, and certifying key financial disclosures that directly affectthe computation of taxable income. In many cases, the audit report also includes detailed reporting of deductions, disallowances, related-party transactions, and other compliance-sensitive disclosures that assist tax administration in risk assessment and scrutiny selection.
Recognising the importance of such independent verification, Section 428(c) prescribes fee consequences for a taxpayer who fails to obtain the audit or furnish the audit report within the prescribed timeline. Where the delay in furnishing the audit report does not exceed one month, the fee payable is ₹75,000. If the delay continues beyond one month, the fee increases to ₹1,50,000.
The graduated fee structure reflects the legislative recognition that audit compliance forms a cornerstone of reliable income reporting. By imposing higher fee consequences for prolonged delays, the provision discourages deferring statutory audits and reinforces the discipline of timely financial verification. At the same time, the structured nature of the fee ensures predictability and transparency in compliance consequences.
Illustration 6: Prolonged Delay in Furnishing Audit Report
Raman Ltd. is required to get its accounts audited under Section 63. Due to prolonged disputes over the valuation of closing stock and pending confirmations from creditors, the company is furnishing the audit report 50 days after the due date.Since the delay exceeds one month, the fee under Section 428(c) shall increase to ₹1,50,000. Raman Ltd. must pay this fee before furnishing the delayed audit report.
Fee for Failure to Furnish Accountant’s Report under Section 172 - Section 428(d)
Section 428(d)prescribes fee consequences where a taxpayer fails to furnish an accountant’s report as required under Section 172. To fully appreciate the compliance significance of this provision, it is important to understand the scope and purpose of Section 172 , which deals with specialised certification requirements under the Income-tax Act, 2025.
Section 172 mandates the furnishing of an accountant’s report in respect of specified transactions or compliance obligations where independent professional certification is considered necessary for ensuring accuracy, transparency, and statutory conformity. Such reports generally arise in situations involving complex financial arrangements, cross-border transactions, structured deductions, or compliance-sensitive reporting areas where verification by a qualified accountant provides additional assurance regarding the correctness of disclosures and adherence to prescribed tax provisions. The accountant’s report typically involves examining supporting documentation, verifying transaction structures, validating statutory conditions, and certifying compliance with parameters that directly influence the computation of taxable income or eligibility for tax benefits.
Recognising the critical role played by such specialised certifications, Section 428(d)prescribes fee consequences where the accountant’s report is not furnished within the prescribed timeline. Where the delay in furnishing the report does not exceed one month, the fee payable is ₹50,000. If the delay continues beyond one month, the fee increases to ₹1,00,000 .
The graded fee structure reflects the legislative intent to emphasise the importance of professional certification in maintaining compliance integrity. Accountant certifications often support high-risk or technically complex reporting requirements, and any delay in furnishing such reports may affect regulatory verification processes and compliance monitoring. By prescribing higher fee consequences for prolonged delays, the provision encourages taxpayers to ensure the timely completion of certification requirements while maintaining transparency and accountability in financial reporting.
Illustration 7: Delay in Accountant Certification
Varsha Bajaj is required to furnish an accountant’s report under Section 172 in respect of a specified compliance obligation. However, due to a delay in obtaining the necessary certification from the accountant, the report is furnished two months after the prescribed due date.
Since the delay exceeds one month, the fee under Section 428(d) shall be ₹1,00,000. The prescribed fee must be paid before the delayed accountant’s report is furnished.
Effective Date of Amendment
It may be noted that the substitution of Sections 427 and 428 under Clause 83 of the Finance Bill, 2026, is proposed to come into force with effect from 1st April 2026 and shall accordingly apply from Tax Year 2026-27(relevant to Assessment Year 2027-28) and subsequent tax years.
From Legislative Intent to Professional Action
The fee provisions introduced under Clause 83 reinforce a fundamental compliance principle—flexibility must be accompanied by responsibility. While the law provides taxpayers with greater opportunity to correct errors and comply voluntarily, it simultaneously emphasises that timely reporting and disciplined compliance form the backbone of a reliable tax ecosystem. In an era of real-time, data-driven administration, accurate and prompt reporting is no longer a procedural requirement but a professional commitment.
For tax professionals, these reforms extend beyond technical interpretation. They call for higher standards of advisory discipline and compliance stewardship. Clause 83, therefore, represents more than a fee framework; it signals a transition towards time-bound, responsible compliance. When legislative facilitation aligns with professional accountability, the result is a tax system that builds trust and professionals who strengthen its credibility.
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