Rule 198: DRC power to reduce or waive penalty or grant immunity
Rule 198 sets out when the Dispute Resolution Committee may grant reduction or waiver of penalty imposable, immunity from prosecution, or both, to a person who applied for dispute resolution under section 379. Two conditions must be satisfied: the tax due on the returned income has been paid in full, and the person co-operated with the Committee. Immunity is barred where prosecution began before the application was received, and any relief granted can be withdrawn if its conditions are breached.
Official notified Income-tax Rules, 2026Need advice on Rule 198?
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Bare law
Rule 198 - Power to reduce or waive penalty imposable or grant immunity from prosecution or both under section 379
(1) The Dispute Resolution Committee shall, upon receipt of intimation as per paragraph 4(1)(xix) of the e-Dispute Resolution Scheme, 2022, for the reasons to be recorded in writing and subject to such conditions as it may think fit to impose, grant to the person who made the application for dispute resolution under section 379 reduction or waiver of penalty imposable, or immunity from prosecution, or both, in respect of the order which is the subject matter of resolution, if it is satisfied that such person has— (i) paid the tax due on the returned income in full; and (ii) co-operated with the Dispute Resolution Committee in the proceedings before it.
(2) No immunity shall be granted by the Dispute Resolution Committee in a case where the proceedings for the prosecution for an offence have been initiated before the date of receipt of the application as referred to in paragraph 4(1)(i) of the e-Dispute Resolution Scheme, 2022.
(3) An immunity or reduction or waiver of penalty granted to a person under sub-rule (1) shall stand withdrawn, if such person fails to comply with any of the conditions subject to which the immunity or reduction or waiver of penalty was granted and thereupon the provisions of the Act shall apply as if such immunity or reduction or waiver of penalty had never been granted.
Rule breakdown
What the Committee may grant
Under Rule 198(1), on receipt of the intimation referred to in paragraph 4(1)(xix) of the e-Dispute Resolution Scheme, 2022, the DRC may grant reduction or waiver of penalty imposable, or immunity from prosecution, or both, in respect of the order that is the subject matter of resolution.
The grant is discretionary ("subject to such conditions as it may think fit to impose") and the reasons must be recorded in writing.
Conditions and exclusions
The Committee must be satisfied that the person (i) paid the tax due on the returned income in full and (ii) co-operated with the Committee in the proceedings before it.
Rule 198(2) bars immunity where prosecution proceedings for an offence were initiated before the date of receipt of the application referred to in paragraph 4(1)(i) of the e-Dispute Resolution Scheme, 2022. The rule bars immunity in that case; it does not by its words bar penalty reduction or waiver.
Rule 198(3): if the person fails to comply with any condition of the grant, the immunity, reduction or waiver stands withdrawn and the Act applies as if it had never been granted.
The rule refers to the e-Dispute Resolution Scheme, 2022 by name. Confirm the current status and paragraph numbering of the applicable scheme before relying on these cross-references.
Steps
Rule 198(1)(i) requires the tax due on the returned income to have been paid in full.
Respond to the DRC and co-operate in its proceedings.
Check whether any prosecution was initiated before the application was received, because that bars immunity.
Key takeaways
Two preconditions
Full payment of tax due on returned income and co-operation with the DRC.
Prior prosecution bars immunity
No immunity where prosecution was initiated before the application was received.
Relief is conditional
Breach of a condition withdraws the relief as if never granted.
Practical checklist
- Confirm the tax due on the returned income has been paid in full (Rule 198(1)(i)).
- Comply with every condition subject to which relief is granted (Rule 198(3)).
Avoid
- Do not assume immunity is available where prosecution began before the application.
- Do not treat a conditional grant as final if conditions remain to be met.
FAQs
Is penalty reduction or immunity automatic once the DRC application is filed?
No. The Committee must be satisfied about the two conditions in Rule 198(1) and records its reasons; it may impose conditions.
Which tax must be paid?
The tax due on the returned income, in full (Rule 198(1)(i)).
Does section 379(2) still say only "penalty imposable"?
No. Section 83 of the Finance Act, 2026 substituted, with effect from 1 April 2026 (section 1(2)(a) of that Act), in section 379(2) of the Income-tax Act, 2025, the words "waive any penalty imposed or imposable" for "waive any penalty imposable". Rule 198 as printed still refers to "penalty imposable"; the rule text above is reproduced as notified.
Can immunity be granted if prosecution has already started?
Not where the prosecution proceedings were initiated before the date of receipt of the application, under Rule 198(2).
What happens if a condition of the relief is not complied with?
Under Rule 198(3) the relief stands withdrawn and the Act applies as if it had never been granted.
Glossary
- Penalty imposable
- A penalty that can be imposed in respect of the order under resolution.
- Immunity from prosecution
- Protection, granted by the DRC under this rule, from prosecution in respect of the order under resolution.
- Returned income
- Income shown in the return furnished by the person.