Income Tax 2025

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Penalty for failure to furnish statement or information or document by an eligible investment fund. ​

456 ​

If any eligible investment fund required to furnish a statement or any information or document under section 9(12)(e) [section 9A (5)], fails to do so within the time prescribed under that section, the income-tax authority prescribed under the said section may direct that such fund shall pay, by way of penalty, a sum of five lakh rupees.

Explanation

Section Summary: ​

Section 456 imposes a penalty on eligible investment funds that fail to furnish a statement, information, or document as required under Section 9(12)(e) [or Section 9A(5)] within the prescribed time. The penalty amount is fixed at ₹5 lakh.

This section ensures compliance by eligible investment funds with reporting requirements, which are critical for transparency and regulatory oversight.

Key Changes: ​

  • Introduction of Penalty: This is a new provision specifically targeting eligible investment funds. Previously, there was no explicit penalty for non-compliance with furnishing statements or documents under these sections.
  • Fixed Penalty Amount: The penalty is set at ₹5 lakh, which is a fixed amount regardless of the size or nature of the fund.

Practical Implications: ​

  • For Eligible Investment Funds: Funds must ensure timely submission of required statements, information, or documents to avoid penalties. This adds a layer of accountability and may require stricter internal compliance processes.
  • For Tax Authorities: This provision strengthens the enforcement mechanism, allowing authorities to penalize non-compliant funds effectively.

Critical Concepts: ​

  • Eligible Investment Fund: Refers to funds that qualify under Section 9A of the Income Tax Act, such as certain Category I and II Alternative Investment Funds (AIFs) that meet specific conditions.
  • Section 9(12)(e) and Section 9A(5): These sections require eligible investment funds to furnish statements, information, or documents related to their operations, income, or compliance with tax laws.

Compliance Steps: ​

  1. Identify Reporting Requirements: Determine which statements, information, or documents are required under Section 9(12)(e) or Section 9A(5).
  2. Timely Submission: Ensure all required submissions are made within the prescribed deadlines.
  3. Maintain Records: Keep detailed records of all submissions to demonstrate compliance in case of scrutiny.

Example: ​

An eligible investment fund, XYZ AIF, is required to submit a statement detailing its income and investor details under Section 9A(5) by March 31, 2024. If XYZ AIF fails to submit this statement by the deadline, the prescribed income-tax authority can impose a penalty of ₹5 lakh on the fund.

This example highlights the importance of adhering to deadlines and maintaining compliance to avoid penalties.