Chapter XXI - Penalties
Section 456
Section 456: penalty for failure to furnish statement or information or document by an eligible investment fund
Section 456 permits a ₹5,00,000 penalty direction for the stated eligible-investment-fund reporting failure. Its printed Schedule I paragraph reference must now be read alongside the Schedule substituted by the August 2026 amendment.
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Need advice on Section 456?
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
If any eligible investment fund required to furnish a statement or any information or document under paragraph 4 of Schedule I, fails to do so within the time prescribed under the said paragraph, the income-tax authority prescribed under the said paragraph may direct that such fund shall pay, by way of penalty, a sum of ₹500000.
Introduction
The section states a possible ₹5,00,000 penalty direction, not a daily or automatic charge. The August 2026 Schedule substitution changes the reporting-reference context described in this guide.
Key takeaways
Specific fund duty
Establish eligible-fund status and the current reporting duty, and examine the printed cross-reference in light of the substituted Schedule I.
Prescribed due time
A failure occurs only against the time prescribed under that paragraph.
Fixed amount
The stated penalty is ₹5,00,000, subject to the authority’s decision.
Read the printed cross-reference with the substituted Schedule I
The Taxation and Other Laws (Amendment) Act, 2026 substituted Schedule I with deemed effect from 1 April 2026. The current reporting requirement is in paragraph 1(3) of that substituted Schedule: the prescribed statement and other prescribed information or documents are required within ninety days from the end of the tax year.
Section 456 was not expressly amended by that Act and its printed text still refers to paragraph 4 of Schedule I. The statutory quote is preserved. Do not treat the former paragraph number as the current Schedule’s structure or assume that a penalty follows automatically without examining the applicable obligation, statutory power and available safeguards.
For a potential penalty, retain the amended Schedule, relevant prescribed requirement, actual filing record and any notice. The section uses a discretionary direction to pay ₹5 lakh; it does not state a daily penalty. Assess the cross-reference issue and Section 470 reasonable-cause protection on the facts.
What Section 456 says
"If any eligible investment fund required to furnish a statement or any information or document under paragraph 4 of Schedule I, fails to do so within the time prescribed under the said paragraph, the income-tax authority prescribed under the said paragraph may direct that such fund shall pay, by way of penalty, a sum of ₹5,00,000."
Who this applies to
The penalty concerns the eligible investment fund reporting failure described in Section 456. Read its printed reference with the current substituted Schedule I and assess the statutory conditions before treating any filing failure as liable.
Official August 2026 amendment
Step-by-step flow for applying Section 456
- 1
Is the entity an eligible investment fund?
- No: Section 456 does not apply.
- Yes: Go to the next step.
- 2
Is it required to furnish a statement, information or document under paragraph 4 of Schedule I?
Identify each statement, information or document that paragraph requires.
- No: Section 456 does not apply.
- Yes: Go to the next step.
- 3
Was it furnished within the time prescribed under that paragraph?
The time limit is prescribed; Section 456 does not state it.
- Yes: No penalty under Section 456.
- No: Go to the next step.
- 4
Fix the penalty
The income-tax authority prescribed under paragraph 4 of Schedule I may direct the fund to pay a penalty of ₹5,00,000. It is a fixed sum, not a daily amount.
Practical checklist
Do
- Identify the current prescribed form, requested document and deadline in the substituted Schedule I; retain the statutory cross-reference analysis.
- Keep filing acknowledgements and any correspondence about the information request.
Avoid
- Do not apply this penalty to every fund reporting error without checking the Schedule I obligation.
Illustrative example
Worked example: a fund's statement filed late
Hypothetical facts (illustration only, not a real taxpayer): An eligible investment fund must furnish a statement under paragraph 4 of Schedule I. It files the statement 20 days after the prescribed time. The 20-day delay is assumed for illustration.
Coverage
The fund is an eligible investment fund required to furnish the statement, so Section 456 is relevant.
Failure
It did not furnish the statement within the prescribed time.
Penalty measure
Section 456 provides a fixed penalty of ₹5,00,000. It does not vary with the length of the delay.
Discretion
The prescribed authority "may direct" the penalty.
Outcome
- Possible penalty under Section 456: ₹5,00,000.
- Filing late is still a failure; only filing within the prescribed time avoids the penalty.
Frequently asked questions
What is the penalty under Section 456?
The section states ₹5,00,000, which the prescribed authority may direct for the specified reporting failure. The printed paragraph reference must be read with the substituted Schedule I; see the current-reference note.
Does the penalty amount vary with the duration of the failure?
No - unlike several other penalties in this Chapter that accrue daily, section 456 sets a single fixed amount of ₹5,00,000.
Need help applying this provision to your situation?
Get help with eligible investment fund reporting complianceLast updated 10 October 2026