Income Tax 2025

Appearance

Maintenance, keeping and furnishing of information and document by certain persons. ​

171(1) ​

Every person,––

  • (a) who has entered into an international transaction or specified domestic transaction; or
  • (b) is a constituent entity of an international group, shall keep and maintain such information and document in respect thereof and for such period and in such manner, as prescribed.

171(2) ​

The Assessing Officer or the Commissioner (Appeals) may, during any proceeding under this Act, require any person referred to in sub-section (1)(a) to furnish any information or document referred therein within ten days from the date of receipt of a notice issued in this regard.

171(3) ​

The Assessing Officer or the Commissioner (Appeals) may, on an application made by such person, extend the period of ten days by a further period not exceeding thirty days.

171(4) ​

Every person referred to in sub-section (1)(b) shall furnish the information and document referred to in sub-section (1) to the authority prescribed under section 511(1), in such manner, on or before such date, as prescribed.

171(5) ​

In this section,—

  • (a) “constituent entity” shall have the meaning assigned to it in section 511 (10)(d);
  • (b) “international group” shall have the meaning assigned to it in section 511 (10)(g).
Explanation

Section Summary: ​

Section 171 of the new income tax law mandates that certain persons, such as those involved in international transactions, specified domestic transactions, or part of an international group, must maintain and furnish specific information and documents. This section ensures transparency and compliance with tax regulations, particularly in cross-border and complex transactions.

Key Changes: ​

  1. Expanded Scope: The section now explicitly includes constituent entities of international groups, in addition to those involved in international or specified domestic transactions.
  2. Prescribed Manner and Period: The law specifies that the information and documents must be maintained and furnished in a prescribed manner and for a prescribed period, which was not as explicitly detailed in the prior law.
  3. Authority for Furnishing Information: Sub-section (4) introduces a requirement to furnish information to a prescribed authority under Section 511(1), which is a new addition.

Practical Implications: ​

  1. For Taxpayers Involved in International Transactions: Taxpayers must ensure proper documentation and record-keeping for international or specified domestic transactions. Failure to do so could lead to penalties or scrutiny during tax assessments.
  2. For Constituent Entities of International Groups: These entities must now comply with additional reporting requirements, which may increase administrative burdens but ensure alignment with global tax transparency standards.
  3. For Tax Authorities: This section strengthens the ability of tax authorities to access and verify information, reducing the risk of tax evasion or misreporting.

Critical Concepts: ​

  1. Constituent Entity: Defined under Section 511(10)(d), this refers to an entity that is part of an international group, such as a subsidiary, parent, or affiliate.
  2. International Group: Defined under Section 511(10)(g), this refers to a group of entities operating in multiple countries, with at least one entity being tax-resident outside India.
  3. Specified Domestic Transaction: These are specific domestic transactions (e.g., related-party transactions) that are subject to transfer pricing regulations.

Compliance Steps: ​

  1. Maintain Records: Ensure all information and documents related to international transactions, specified domestic transactions, or international group activities are maintained as prescribed.
  2. Furnish Information on Demand: Be prepared to provide the required information or documents within 10 days of receiving a notice from the Assessing Officer or Commissioner (Appeals). An extension of up to 30 days can be requested if needed.
  3. Submit to Prescribed Authority: For constituent entities of international groups, submit the required information and documents to the authority prescribed under Section 511(1) by the specified deadline.

Examples: ​

  1. Scenario 1: An Indian company enters into a transaction with its foreign subsidiary (an international transaction). The company must maintain detailed records of the transaction, including pricing details, contracts, and invoices, and be ready to furnish these if requested by the tax authorities.
  2. Scenario 2: A multinational group has an Indian subsidiary (a constituent entity). The subsidiary must now furnish specific information about its operations and transactions within the group to the prescribed authority by the due date.

This section ensures that taxpayers and entities involved in complex or cross-border transactions maintain transparency and comply with India's tax laws.