Overview
The Finance Bill 2026 introduces an amendment to Section 466 of the Income-tax Act, 1961, increasing the maximum penalty for non-compliance with information requests made during tax authority visits under Section 254. The penalty will rise from ₹1,000 to ₹25,000, effective April 1, 2026.
This revision is intended to strengthen enforcement by imposing a more meaningful deterrent, while still ensuring the penalty remains proportionate to the nature of the violation.
Key Details
Current Penalty: A fine of up to ₹1,000 may be levied by a Joint Commissioner, Deputy Director, Assistant Director, or Assessing Officer for failure to comply with information requests made under Section 254.
Proposed Penalty: The maximum penalty will be increased to ₹25,000, effective from FY 2026-27.
Purpose: The amendment aims to reinforce tax administration by encouraging greater voluntary compliance during on-site inspections.
What This Means?
The Offence
The penalty is triggered when a proprietor, employee, or any individual present at a business or professional premises fails to comply with a directive from an authorized income-tax authority such as a Joint Commissioner, Deputy Director, or Assessing Officer to provide information during an on-site visit.
Legislative Intent
According to the government, the existing maximum penalty of ₹1,000 was insufficient as a deterrent. The proposed increase to ₹25,000 is designed to encourage greater cooperation from taxpayers during field-level information gathering and to foster voluntary compliance.
Context within the New Tax Law
This amendment is part of the broader reforms under the proposed Income-tax Act, 2025. Several other penalties under the new framework, including those related to delays in filing tax audit reports, have also been revised to introduce a stricter, fixed-fee structure effective from April 1, 2026.
Details of the New Penalty
The following table summarizes the key changes:
| Aspect | Details |
| New Maximum Penalty | ₹25,000 (increased from the current ₹1,000) |
| Applicable Law | Section 466 of the new Income-tax Act, 2025 |
| Related Provision | Section 254 of the Income-tax Act, 2025 (power of tax authorities to collect information from business or professional premises) |
| Effective Date | April 1, 2026 (applicable to the tax year 2026-27 and subsequent years) |
The amendment significantly increases the penalty under section 466 to ensure stronger deterrence and improve compliance with information requests by tax authorities.
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