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Section 271GC Penalty for failure to submit statement by liaison office of non-resident in India
Budget 2024 proposes new rules for non-resident entities with liaison offices in India, affecting their statement submission process. Currently, such entities must file a statement within sixty days of the financial year-end under Section 285. The amendment suggests that the filing period will now be prescribed by rules, and introduces a new penalty under Section 271GC for late submissions: ₹1,000 per day for delays up to three months and ₹1 lakh for longer delays. However, penalties can be avoided if a reasonable cause is proven, as amended in Section 273B. These changes aim to improve compliance and will be effective from April 1, 2025. Additionally, Section 273B will reference the new penalty provisions, while Section 285 will adjust the filing timeframe to align with rule specifications.
Budget 2024: Submission of statement by liaison office of non-resident in India
A non-resident having a liaison office in India, is required to prepare and deliver a statement in respect of its activities in a financial year to the Assessing Officer within sixty days from the end of such financial year under section 285 of the Act. It is proposed that the period within which such statement is to be filed, be henceforth prescribed under the Rules.
2. Further, in order to ensure better compliance in this respect, it is proposed that failure to furnish statement may attract a penalty of one thousand rupees for every day for which the failure continues, if the period of failure does not exceed three months; and one lakh rupees in any other case. A new section 271GC is proposed to be inserted in this regard.
3. However, this penalty shall not be leviable if the assessee proves that there was reasonable cause for the said failure. It is proposed to amend section 273B to provide for this.
4. These amendments will take effect from the 1st day of April, 2025.
[Clauses 80, 82 & 86]
Extract of Clause 80 of Finance Bill 2024
Clause 80 of the Bill seeks to insert a new section 271GC in the Income-tax Act relating to penalty for failure to submit statement under section 285.
It is proposed to insert the said section so as to provide that if any person who is required to furnish statement under section 285, fails to do so within the period prescribed under that section, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one thousand rupees for every day for which the failure continues, if the period of failure does not exceed three months or one lakh rupees in any other case.
This amendment will take effect from 1st April, 2025.
Extract of Clause 82 of Finance Bill 2024
Clause 82 of the Bill seeks to amend section 273B of the Income-tax Act relating to penalty not to be imposed in certain cases.
The said section, inter alia, provides that notwithstanding anything contained in the provisions mentioned therein, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
It is proposed to amend the said section to give reference of section 271AA also therein so as to allow non-imposition of penalty on any person or assessee for failure under section 271FAA if he proves that there was reasonable cause for such failure.
This amendment will take effect from 1st October, 2024.
It is further proposed to amend the said section to provide the reference of section 271GC also therein.
This amendment will take effect from 1st April, 2025.
Extract of Clause 86 of Finance Bill 2024
Clause 86 of the Bill seeks to amend section 285 of the Income-tax Act relating to submission of statement by a non-resident having liaison office.
The said section provides that every person, being a non-resident having a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999, shall, in respect of its activities in a financial year, prepare and deliver or cause to be delivered to the Assessing Officer having jurisdiction, within sixty days from the end of such financial year, a statement in such form and containing such particulars as may be provided by rules.
It is proposed to amend the said section to provide that the said statement shall be delivered to the Assessing Officer within the period and containing such particulars as may be provided by rules.
This amendment will take effect from 1st April, 2025.
82. Amendment of section 273B.
In section 273B of the Income-tax Act,––
(a) after the word, figures and letters “section 271FA,”, the word, figures and letters “section 271FAA,” shall be inserted with effect from the 1st day of October, 2024;
(b) after the word, figures and letters “section 271GB,”, the words, figures and letters “section 271GC,” shall be inserted with effect from the 1st day of April, 2025.
Insertion of new section 271GC.
After section 271GB of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2025, namely:––
Penalty for failure to submit statement under section 285.
“271GC. If any person who is required to furnish statement under section 285, fails to do so within the period prescribed under that section, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of––
(a) one thousand rupees for every day for which the failure continues, if the period of failure does not exceed three months; or
(b) one lakh rupees in any other case.”.
86. Amendment of section 285.
In section 285 of the Income-tax Act, for the words “sixty days from the end of such financial year, a statement”, the words “such period, a statement” shall be substituted with effect from the 1st day of April, 2025.
