Chapter XXIII - Miscellaneous
Section 499
Section 499: certain asset transfers during tax proceedings are void
Section 499 stops an assessee from defeating tax recovery by quietly transferring or mortgaging assets while a tax proceeding is pending or after it concludes but before the Tax Recovery Officer's notice is served. Such a transfer is treated as void against the tax department's claim, subject to two exceptions.
On this page
Need advice on Section 499?
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) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice by the Tax Recovery Officer as per the procedure specified under section 413, any assessee creates a charge on, or parts with the possession of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise.
(2) The charge or transfer as referred to in sub-section (1) shall not be void if it is made—
(a) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee; or
(b) with the previous permission of the Assessing Officer.
(3) This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds ₹5000 and the assets charged or transferred exceed ₹10000 in value.
(4) For the purposes of this section,––
(a) “assets” means land, building, machinery, plant, shares, securities, fixed deposits in banks, and virtual digital asset, to the extent to which any of the said assets do not form part of the stock-in-trade of the business of the assessee;
(b) the modes of creating a charge on or parting with the possession of such assets shall include sale, mortgage, gift, exchange or any other mode of transfer.
Introduction
Section 499 protects tax recovery while a proceeding is pending and after it finishes but before the specified recovery notice. It can make a transfer ineffective against the tax claim, subject to express good-faith purchaser and prior-permission exceptions and monetary thresholds.
Key takeaways
Recovery-protecting voidness
A charge or transfer during a pending proceeding or the defined later interval can be void against a tax claim.
Protected transaction
Adequate consideration without the relevant notice, or prior Assessing Officer permission, is an express exception.
Monetary and asset limits
The section applies only above its tax-claim and asset-value thresholds and defines covered assets.
When a charge or transfer is void
"Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice by the Tax Recovery Officer as per the procedure specified under section 413, any assessee creates a charge on, or parts with the possession of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise."
Exceptions - when the charge or transfer is NOT void
The charge or transfer under sub-section (1) is not void if it is made:
- for adequate consideration and without notice of the pendency of the proceeding or, as the case may be, without notice of the tax or other sum payable by the assessee; or
- with the previous permission of the Assessing Officer.
Monetary thresholds
Section 499 applies only where the amount of tax or other sum payable, or likely to be payable, exceeds ₹5,000, and the assets charged or transferred exceed ₹10,000 in value.
What counts as an "asset", and what counts as a "transfer"
"Assets" means land, building, machinery, plant, shares, securities, fixed deposits in banks, and virtual digital asset, to the extent these do not form part of the assessee's business stock-in-trade.
The modes of creating a charge on, or parting with possession of, such assets include sale, mortgage, gift, exchange or any other mode of transfer.
Step-by-step flow for applying Section 499
- 1
Is a proceeding under the Act pending or completed, with no notice yet served by the Tax Recovery Officer under the Section 413 procedure?
Section 499(1) covers charges and transfers made during the pendency of a proceeding, or after its completion but before that notice is served.
- No: Section 499(1) does not apply to the charge or transfer.
- Yes: Go to the next step.
- 2
Did the assessee create a charge on, or part with possession of, an asset?
"Assets" are land, building, machinery, plant, shares, securities, fixed deposits in banks and virtual digital asset, except to the extent they form part of stock-in-trade of the assessee's business (Section 499(4)(a)). Modes include sale, mortgage, gift, exchange or any other mode of transfer (Section 499(4)(b)).
- No: Section 499 does not apply.
- Yes: Go to the next step.
- 3
Does the tax or other sum payable, or likely to be payable, exceed ₹5,000, and do the assets charged or transferred exceed ₹10,000 in value?
Both conditions in Section 499(3) must be met.
- No: Section 499 does not apply.
- Yes: Go to the next step.
- 4
Does an exception in Section 499(2) apply?
(a) the charge or transfer is for adequate consideration and without notice of the pending proceeding or of the tax or other sum payable; or (b) it is made with the previous permission of the Assessing Officer.
- Yes: The charge or transfer is not void under Section 499.
- No: Go to the next step.
- 5
What is the result?
The charge or transfer is void as against any claim for tax or any other sum payable by the assessee as a result of the completion of the proceeding or otherwise (Section 499(1)).
Practical checklist
Do
- Check the proceeding and Tax Recovery Officer notice dates before assessing whether a transfer falls in the statutory window.
- Confirm the tax/sum and asset-value thresholds and whether the property is a listed asset rather than business stock-in-trade.
- Retain evidence of adequate consideration and absence of notice, or obtain prior Assessing Officer permission where relying on those exceptions.
Avoid
- Do not describe every transfer as automatically void for all purposes; sub-section (1) addresses its effect against the tax claim.
- Do not overlook the previous-permission route under sub-section (2)(b).
Illustrative example
Worked example: a gift of shares during a pending reassessment
Hypothetical facts (illustration only, not a real taxpayer): Mr. Mehta's reassessment is pending and no Tax Recovery Officer notice has been served. The tax likely to be payable is an assumed ₹3,40,000. He gifts shares he holds as an investment, worth an assumed ₹6,50,000, to his brother. He did not ask the Assessing Officer for permission.
Timing
The gift is made while the proceeding is pending and before any Tax Recovery Officer notice, so it falls within Section 499(1).
Asset and mode
Shares held as an investment (not stock-in-trade) are assets under Section 499(4)(a), and a gift is a mode of transfer under Section 499(4)(b).
Thresholds
₹3,40,000 exceeds ₹5,000 and ₹6,50,000 exceeds ₹10,000, so both Section 499(3) conditions are met.
Exceptions
A gift is not for adequate consideration, so Section 499(2)(a) is not met. There was no previous permission of the Assessing Officer, so Section 499(2)(b) is not met.
Outcome
- The gift is void as against the claim for the tax payable as a result of the reassessment.
- Had Mr. Mehta obtained the Assessing Officer's previous permission, the gift would not have been void under Section 499.
Glossary
- Charge
- A security interest or encumbrance created over an asset; section 499 includes charges as well as transfers.
- Stock-in-trade
- Business trading stock excluded from the defined “assets” in section 499(4)(a).
Frequently asked questions
Can I sell or mortgage my property while a tax proceeding against me is pending?
You can, but under Section 499(1) such a transfer or charge is void against any tax claim arising from that proceeding, unless it falls within one of the exceptions in Section 499(2).
Is every transfer during a pending tax proceeding void?
No. A transfer for adequate consideration made without notice of the pending proceeding or the tax payable, or a transfer made with the Assessing Officer's previous permission, is not void under this section.
Is there a minimum amount for Section 499 to apply?
Yes - the tax or other sum payable or likely to be payable must exceed ₹5,000, and the assets charged or transferred must exceed ₹10,000 in value.
Does "assets" under Section 499 include virtual digital assets?
Yes - the definition of "assets" in Section 499(4)(a) expressly includes virtual digital asset.
Does Section 499 cover shares or other assets held as stock-in-trade?
No. Section 499(4)(a) covers the listed assets only to the extent they do not form part of the stock-in-trade of the assessee's business.
Need help applying this provision to your situation?
Talk to our tax team about this sectionLast updated 9 October 2026