Chapter XXI - Penalties
Section 460
Section 460: penalty for failure to submit statement under Section 505
Section 460 penalises a person who is required to furnish a statement under section 505 but fails to do so within the prescribed period, with the penalty structured differently depending on how long the failure continues.
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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
If any person required to furnish statement under section 505, fails to do so within the period prescribed under that section, the Assessing Officer may impose on him, a penalty of-- (a) ₹1000 for every day for which the failure continues, if the period of failure does not exceed three months; or (b) ₹100000 in any other case.
Introduction
Section 460 addresses a late statement required by section 505. The Assessing Officer may impose one of two penalties according to whether the failure lasts no more than three months or longer.
Key takeaways
Up to three months
The provision specifies ₹1,000 for each day the failure continues if the failure period does not exceed three months.
Longer failure
If the failure exceeds three months, the specified penalty is ₹1,00,000.
What Section 460 says
"If any person required to furnish statement under section 505, fails to do so within the period prescribed under that section, the Assessing Officer may impose on him, a penalty of-- (a) ₹1,000 for every day for which the failure continues, if the period of failure does not exceed three months; or (b) ₹1,00,000 in any other case."
How the penalty is structured
| Duration of failure | Penalty |
|---|---|
| Up to three months | ₹1,000 for every day the failure continues |
| Beyond three months | ₹1,00,000 |
Applying Section 460 in practice
Duration matters. Failure to furnish the section 505 statement within its prescribed period can attract ₹1,000 per day if failure does not exceed three months, or ₹1 lakh in the other case. This is the enforcement counterpart to the non-resident liaison-office reporting duty.
Step-by-step flow for applying Section 460
- 1
Is the person a non-resident with a liaison office in India required to furnish a statement under section 505?
Section 505 requires the statement in respect of the liaison office's activities in a tax year, within the prescribed period.
- No: Section 460 does not apply.
- Yes: Go to the next step.
- 2
Was the statement furnished within the period prescribed under section 505?
The period is prescribed; Section 460 does not state it.
- Yes: No penalty under Section 460.
- No: Go to the next step.
- 3
Count the period of failure
Establish how long the failure continued after the prescribed period.
- 4
Did the period of failure exceed three months?
The Assessing Officer may impose the penalty.
- No: ₹1,000 for every day the failure continues (Section 460(a)).
- Yes: ₹1,00,000 (Section 460(b)).
Practical checklist
Do
- Identify the prescribed section 505 filing deadline and actual filing date.
- Apply the daily ₹1,000 limb only if the period of failure does not exceed three months; otherwise check the ₹1,00,000 limb.
- RBI-compliant liaison-office status, applicable tax year, prescribed statement and deadline, filing date and duration.
Avoid
- Do not add both statutory penalty limbs together for the same failure.
Illustrative example
Worked example: a liaison office statement filed late
Hypothetical facts (illustration only, not a real taxpayer): A foreign company has a liaison office in India set up as per the Reserve Bank of India guidelines. Two alternative facts are tested: it furnishes its section 505 statement 40 days late, or about four months late. The delays are assumed for illustration.
Coverage
The liaison office must furnish a statement under section 505, so Section 460 is relevant.
40 days late
The failure does not exceed three months, so Section 460(a) applies: 40 × ₹1,000 = ₹40,000.
About four months late
The failure exceeds three months, so Section 460(b) applies: ₹1,00,000, not a daily amount.
Discretion
The Assessing Officer "may" impose the penalty.
Outcome
- Possible penalty: ₹40,000 for a 40-day delay; ₹1,00,000 for a delay of more than three months.
- Once the failure exceeds three months, Section 460(b) gives a single sum of ₹1,00,000.
Frequently asked questions
What is the penalty for a short delay in filing a Section 505 statement?
₹1,000 for every day of the failure, as long as the failure period does not exceed three months.
What if the failure continues beyond three months?
The penalty switches to a flat ₹1,00,000, under section 460(b), rather than continuing to accumulate daily.
Who may impose a Section 460 penalty?
The Assessing Officer may impose the penalty specified in section 460.
Is the three-month test based on office age?
No; it is the period of the filing failure. Section 470 reasonable cause is relevant.
Need help applying this provision to your situation?
Get help responding to a statement filing noticeLast updated 10 October 2026