Chapter XXII - Offences and Prosecution
Section 478
Section 478: punishment for wilful attempt to evade tax
Section 478 addresses wilful attempts to evade tax, penalty or interest chargeable or imposable, and under-reporting income, in subsection (1). Subsection (2) separately addresses wilful attempts to evade payment of tax, penalty or interest under the Act.
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Need advice on Section 478?
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 a person wilfully attempts in any manner to evade any tax, penalty or interest chargeable or imposable, or under-reports his income, under this Act, he shall be punishable—
(a) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount sought to be evaded or tax on under-reported income exceeds fifty lakh rupees; or
(b) with simple imprisonment for a term up to six months, or with fine, or with both, where the amount sought to be evaded or tax on under-reported income exceeds ten lakh rupees but does not exceed fifty lakh rupees; or
(c) with fine, in any other case.
(2) If a person wilfully attempts in any manner to evade payment of any tax, penalty or interest under this Act, he shall be punishable —
(a) with simple imprisonment for a term up to two years, or with fine, or with both, where the amount sought to be evaded exceeds fifty lakh rupees; or
(b) with simple imprisonment for a term up to six months, or with fine, or with both, where the amount sought to be evaded exceeds ten lakh rupees but does not exceed fifty lakh rupees; or
(c) with fine, in any other case.
(3) The punishment referred to in this section, shall be without prejudice to any penalty that may be imposable under any other provision of this Act.
(4) For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act, or the payment thereof, shall include a case where any person—
(a) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or
(b) makes or causes to be made any false entry or statement in such books of account or other documents; or
(c) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or
(d) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof.
Introduction
Section 478 addresses wilful attempts to evade tax, penalty or interest, including payment of those amounts, and specifies examples of false-record conduct. The Finance Act, 2026 replaced the former imprisonment bands with amount-based simple-imprisonment or fine tiers.
Key takeaways
Wilful attempt
The section requires a wilful attempt, with separate limbs for evading a charge or payment.
Amount thresholds
The current tiers distinguish amounts above ₹50 lakh, above ₹10 lakh through ₹50 lakh, and other cases.
Records can evidence attempt
Subsection (4) names false entries, omissions and other evasion-enabling circumstances.
Wilful attempt to evade tax/under-report income - sub-section (1)
If a person wilfully attempts in any manner to evade any tax, penalty or interest chargeable or imposable, or under-reports their income, under the Act, they are punishable under the current text (substituted by the Finance Act, 2026, effective 1 April 2026):
| Amount sought to be evaded / tax on under-reported income | Punishment |
|---|---|
| Exceeds ₹50,00,000 | Simple imprisonment up to two years, or fine, or both |
| Exceeds ₹10,00,000 but does not exceed ₹50,00,000 | Simple imprisonment up to six months, or fine, or both |
| Any other case | Fine only |
Wilful attempt to evade payment - sub-section (2)
Subsection (2) concerns a wilful attempt to evade payment of tax, penalty or interest under the Act. Where the amount sought to be evaded exceeds ₹50 lakh, punishment is simple imprisonment up to two years, or fine, or both. Where it exceeds ₹10 lakh but does not exceed ₹50 lakh, punishment is simple imprisonment up to six months, or fine, or both. In any other case, punishment is a fine.
The punishment under this section is without prejudice to any penalty that may also be imposable under any other provision of the Act - a person can face both this prosecution and a separate monetary penalty for the same conduct.
How this changed
Before the Finance Act, 2026 amendment, both sub-sections carried rigorous imprisonment: not less than six months (extendable to seven years) where the amount exceeded ₹25 lakh, or not less than three months (extendable to two years) in any other case, plus fine. The current structure replaces this with generally lighter simple imprisonment, tiered at different (higher) rupee thresholds.
Step-by-step flow for applying Section 478
- 1
What kind of wilful attempt is alleged?
Section 478(1): wilful attempt to evade tax, penalty or interest chargeable or imposable, or under-reporting of income. Section 478(2): wilful attempt to evade payment of tax, penalty or interest.
- Neither: Section 478 does not apply.
- One or both: Go to the next step.
- 2
Do the facts fall within Section 478(4)?
A wilful attempt includes possessing or controlling relevant books or documents with a false entry, making a false entry, wilfully omitting a relevant entry, or causing any other circumstance that enables evasion of tax, penalty or interest or its payment. These are inclusions, not the only cases.
- 3
Quantify the amount
Under Section 478(1), take the amount sought to be evaded or the tax on under-reported income. Under Section 478(2), take the amount sought to be evaded.
- 4
Apply the tier
Above ₹50 lakh: simple imprisonment up to two years, or fine, or both. Above ₹10 lakh but not above ₹50 lakh: simple imprisonment up to six months, or fine, or both. Any other case: fine only. The Act does not state the amount of the fine here.
- 5
Is any penalty also involved?
Section 478(3): the punishment is without prejudice to any penalty imposable under any other provision of the Act. Prosecution and penalty can run separately.
Practical checklist
Do
- Separate an alleged attempt to evade a charge or under-report income under subsection (1) from an attempt to evade payment under subsection (2).
- Check the alleged conduct and relevant books or documents against subsection (4), and calculate the amount specified by the applicable punishment limb rather than using turnover.
Avoid
- Do not use an inclusive ₹10 lakh lower boundary for the middle punishment tier: that tier requires an amount exceeding ₹10 lakh and not exceeding ₹50 lakh.
Illustrative example
Worked example: suppressed sales recorded in a second set of books
Hypothetical facts (illustration only, not a real taxpayer): A trader keeps a second set of books recording cash sales that are omitted from the regular books used for the return. The tax on the under-reported income is worked out at ₹56,00,000 (assumed figure; the rate comes from the Central Act, not Section 478).
Nature of attempt
Under-reporting income backed by a false set of books is within Section 478(1).
Inclusion
Possessing books with false entries and omitting relevant entries are both covered by Section 478(4)(a) and (c).
Tier
₹56,00,000 exceeds ₹50 lakh, so Section 478(1)(a) applies: simple imprisonment up to two years, or fine, or both.
Penalty
Under Section 478(3), any penalty under another provision of the Act is separate from this punishment.
Outcome
- On these assumed facts the trader falls in the highest tier of Section 478(1).
- If the tax on under-reported income were, say, ₹8,00,000, only a fine would apply under Section 478(1)(c).
Frequently asked questions
What is the punishment for wilful tax evasion under the current Act?
The applicable amount is the amount sought to be evaded or tax on under-reported income under subsection (1), and the amount sought to be evaded under subsection (2). Above ₹50 lakh, the punishment is simple imprisonment up to two years, or fine, or both; above ₹10 lakh but not exceeding ₹50 lakh, it is simple imprisonment up to six months, or fine, or both; in any other case, it is a fine.
Is under-reporting income treated the same as evading tax outright?
Yes - Section 478(1) covers both wilfully attempting to evade tax/penalty/interest and wilfully under-reporting income, with the same tiered punishment structure applying to both.
Can I face both a penalty and prosecution for the same tax evasion?
Yes - Section 478(3) makes clear the punishment under this section is without prejudice to any penalty imposable under any other provision of the Act.
Need help applying this provision to your situation?
Get help if you're facing a tax evasion notice or prosecutionLast updated 10 October 2026