Section 271GA Penalty for failure in furnishing the information / document in Form 49D as required under section 285A

The provisions of section 285A of the Income Tax Act mandates the specified Indian concern to provide the particular information / document in the specified Form 49D. In case the Indian concern fails to furnish the required information / document in Form 49D within the prescribed time limit, then the Income Tax Authority may direct the Indian concern to pay the penalty under provisions of section 271GA of the Income Tax Act.

Thus, the penalty provisions of section 271GA are applicable only to the specified Indian concern in case of failure in satisfying the reporting requirement as per provisions of section 285A. The said penalty provisions of section 271GA are taken up and explained in the present article.

Understanding provisions of section 271GA 

The provisions of section 271GA of the Income Tax Act states as under –

  • The specified Indian concern is required to furnish information / documents as per provisions of section 285A.
  • In case such specified Indian concern fails to furnish the required information / documents, the Income Tax Authority may direct such Indian concern to pay the penalty under section 271GA.

In simple terms, if the Indian concern fails to furnish the information / documents as required under section 285A within the prescribed time limit, then the concern would be penalized under section 271GA.

Requirement under section 285A of the Income Tax Act

The provisions of section 285A mandate the Indian concern to furnish information / documents in case the following conditions are satisfied –

1. Shares or interest in a foreign company / entity derives substantial value (whether directly or indirectly) from assets located in India [as referred in Explanation 5 to section 9 (1) (i)]; and

2. Such foreign company / entity holds (whether directly or indirectly) such assets in India through the Indian concern or in such Indian concern.

In case both the above conditions are satisfied, the Indian concern needs to furnish the information / document in Form 49D within the prescribed time limit. The Indian concern is required to furnish such information for the purpose of determination of any income accruing / arising in India under section 9 (1) (i) of the Income Tax Act.

Amount of penalty payable under section 271GA of Income Tax Act

The penalty amount payable under section 271GA is tabulated here under –

Particulars Amount of penalty
In case the transaction had the effect (whether directly or indirectly) of transferring the right of management / control in relation to the Indian Concern. An amount equal to 2% of the value of the transaction.
In any other case. INR 5,00,000

It is pertinent to mention here that in case the defaulter proves the reasonable cause for failure, then as per provisions of section 273B of the Income Tax Act, no penalty can be imposed on the specified Indian concern under section 271GA.

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