Chapter XXI - Penalties
Section 446
Section 446: penalty for crypto-asset transaction reporting failures
Section 446 backs up the crypto-asset reporting obligation under section 509 with two separate penalties - a daily penalty for simply not filing the required statement on time, and a flat penalty for filing it with inaccurate information or without proper due diligence.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) If any person who is required to furnish a statement in respect of a transaction of a crypto-asset under section 509(1), fails to furnish such statement within the time prescribed under the said section, the prescribed income-tax authority under that section may impose on him, a penalty of ₹200 for every day for which such failure continues.
(2) The prescribed income-tax authority may impose a penalty of ₹50000 on a person referred in sub-section (1), if such person—
(a) provides inaccurate information in the statement and fails to remove such inaccuracy as per section 509(4); or
(b) fails to comply with due diligence the requirement under section 509(5).
Introduction
The Finance Act, 2026 substituted section 446 with penalties connected to crypto-asset transaction reporting under section 509.
Late furnishing can lead to a daily penalty. Inaccurate information left uncorrected under section 509(4), or failure of due diligence under section 509(5), can lead to a separate fixed penalty.
Key takeaways
Late statement
The prescribed authority may impose ₹200 for each day the required statement remains unfiled.
Inaccuracy or due diligence
A ₹50,000 penalty may be imposed for the distinct failures in subsection (2).
The word “may” matters
The section empowers the prescribed authority to impose a penalty; it does not phrase every case as automatic.
Read section 509
The reporting duty, correction and due-diligence steps are specified there.
Penalty for not furnishing the statement on time
Sub-section (1): if a person required to furnish a statement of a crypto-asset transaction under section 509(1) fails to furnish it within the prescribed time, the prescribed income-tax authority under that section may impose a penalty of ₹200 for every day the failure continues.
Penalty for inaccurate information or lack of due diligence
Sub-section (2): the prescribed income-tax authority may impose a penalty of ₹50,000 on the same person if they either (a) provide inaccurate information in the statement and fail to remove the inaccuracy as required under section 509(4), or (b) fail to comply with the due diligence requirement under section 509(5).
Applying Section 446 in practice
Two penalty tracks. A person required to file a section 509(1) crypto-asset statement faces a possible ₹200-per-day penalty for late non-filing. Inaccurate information left uncorrected under section 509(4), or a section 509(5) due-diligence failure, can attract a separate ₹50,000 penalty. Distinct correction clocks: a defect intimation under section 509(2) gives thirty days from intimation to rectify, or a further period allowed by the authority, while a filer who discovers an inaccuracy must inform the prescribed authority and furnish correct information within ten days of discovery under section 509(4), without waiting for notice.
Step-by-step flow for applying Section 446
- 1
Is the person required to furnish a crypto-asset transaction statement under section 509(1)?
- No: Section 446 does not apply.
- Yes: Go to the next step.
- 2
Was the statement furnished within the time prescribed under section 509?
The time limit is prescribed under section 509; Section 446 does not state it.
- No: Under Section 446(1), the prescribed income-tax authority may impose ₹200 for every day the failure continues. Then go to the next step.
- Yes: Go to the next step.
- 3
Did the statement contain inaccurate information that was not removed as section 509(4) requires?
Section 509(4) requires the person to inform the authority and furnish correct information within ten days of coming to know of the inaccuracy.
- Yes: A penalty of ₹50,000 may be imposed under Section 446(2). Section 446(2) states one amount whether clause (a), clause (b) or both apply.
- No: Go to the next step.
- 4
Did the person fail to comply with the due diligence requirement under section 509(5)?
The due diligence itself is laid down by rules made by the Central Government under section 509(5).
- Yes: A penalty of ₹50,000 may be imposed under Section 446(2)(b).
- No: No further penalty under Section 446(2).
Practical checklist
Do
- Retain the statement due date, filing acknowledgment and any correction notice.
- If the filer discovers an inaccuracy, inform the prescribed income-tax authority and furnish correct information within ten days under section 509(4), without waiting for a defect notice under section 509(2).
- establish reporting-person status, covered transaction, prescribed deadline, actual filing, discovery date, notice and correction dates, and due-diligence records. Check section 470 reasonable cause.
Avoid
- Do not rely on the pre-2026 audit-penalty text formerly numbered section 446.
Illustrative example
Worked example: a late and inaccurate crypto statement
Hypothetical facts (illustration only, not a real taxpayer): A crypto-asset exchange is a reporting entity under section 509(1). It furnishes its statement 45 days after the prescribed time. Twenty days after filing, it finds that some transaction values were wrong but does not inform the authority or correct them. The 45-day delay is assumed for illustration.
Late filing
Under Section 446(1), the penalty is ₹200 for each day the failure continues: 45 × ₹200 = ₹9,000.
Inaccuracy not removed
Section 509(4) required it to inform the authority and furnish correct information within ten days. It did not, so Section 446(2)(a) allows a penalty of ₹50,000.
Total exposure
₹9,000 + ₹50,000 = ₹59,000, imposed at the discretion of the prescribed income-tax authority.
Due diligence
Section 446(2) provides a penalty of ₹50,000 where either clause (a) or clause (b) applies. It does not state a separate amount for each clause.
Outcome
- Possible penalty: ₹9,000 for late filing plus ₹50,000 for the uncorrected inaccuracy, ₹59,000 in all.
- Section 446(1) states no upper limit for the daily penalty; it runs for as long as the failure continues.
Frequently asked questions
What is the penalty for late filing of a crypto-asset transaction statement?
₹200 for every day the failure to furnish the statement under section 509(1) continues, under section 446(1).
What if the statement is filed but the information is wrong?
The prescribed authority may impose a ₹50,000 penalty under section 446(2) if inaccurate information is provided and not corrected as required by section 509(4), or the section 509(5) due-diligence requirement is not met.
Does owning a crypto-asset alone trigger this penalty?
The section targets a person required to furnish the specified transaction statement.
Need help applying this provision to your situation?
Get help responding to a crypto-asset reporting noticeLast updated 10 October 2026