Income tax · Notices, assessment and appeals
What is the penalty under section 270A for under-reporting or misreporting income, and how does immunity work?
Short answer
Under section 270A of the 1961 Act (now section 439), the penalty is 50% of the tax on under-reported income, or 200% where it results from misreporting, such as false entries or suppressed facts. For under-reporting, section 270AA (now 440) gives immunity from penalty and prosecution if you pay the tax and interest demanded on time, don't appeal, and apply in Form 68 within one month from the end of the month you receive the order.
Penalty for under-reporting is in section 270A of the Income-tax Act, 1961 (now section 439 of the Income-tax Act, 2025), and immunity in section 270AA (now section 440). Assessments and penalties for FY 2025-26 and earlier years stay under the 1961 Act.
How much the penalty is
| Situation | Penalty |
|---|---|
| Under-reporting: assessed income is higher than the income returned (for example, an addition the officer makes) | 50% of the tax on the under-reported income |
| Misreporting: the under-reporting results from misrepresenting or suppressing facts, unrecorded investments, unsupported expenses, false entries, unrecorded receipts, or unreported international or specified domestic transactions | 200% of the tax on the under-reported income |
Some cases are not under-reporting, for example where you gave a bona fide explanation and disclosed all material facts, or the addition is an estimate on accounts that are correct and complete.
Immunity under the 1961 Act (section 270AA)
You can ask the Assessing Officer for immunity from penalty under section 270A and from prosecution, if all of these apply:
- The penalty is for under-reporting, not misreporting.
- You have paid the tax and interest in the notice of demand within the time it allows.
- You do not appeal against the assessment order.
- You apply in Form 68 within one month from the end of the month in which you received the order.
The officer must decide within three months from the end of the month in which the application is received, and can't reject it without hearing you. While the application is pending, the time for appeal does not run against you.
Immunity under the 2025 Act (section 440)
For tax year 2026-27 onwards, section 440 of the 2025 Act, as substituted by the Finance Act, 2026, also allows immunity in misreporting cases, if you pay additional income-tax in place of the penalty (100% of the tax on the under-reported income, or 120% in some cases of unexplained income), besides the tax and interest. The application is made in Form 161, also within one month from the end of the month in which the order is received.
Deciding between immunity and appeal
- Immunity ends the matter: no penalty, no prosecution, no appeal. It suits additions you accept.
- Appeal keeps your right to contest, but penalty proceedings can continue.
- Decide quickly: the one-month limit is short, and you can't seek immunity once you appeal.
Legal basis
- Sections 270A and 270AA, Income-tax Act, 1961, and Form 68 (assessments for FY 2025-26 and earlier years)
- Sections 439 and 440, Income-tax Act, 2025, as amended by the Finance Act, 2026, and Form 161 (tax year 2026-27 onwards)
Official sources
Related questions
- How do I appeal against an income-tax order, and what are the time limits and fees?First appeal is to the Commissioner (Appeals), online in Form 35 (now Form 99), within 30 days of receiving the notice of demand or the order. The fee...
- What is a faceless assessment, and how does a personal hearing by video work?In a faceless assessment, your case is handled online by an assessment unit you never meet, through the National Faceless Assessment Centre. Every...
- I got an income-tax notice. What should I do first?Don't ignore it, and don't reply in a hurry. First check that it is genuine using the 'Authenticate notice' service on the e-filing portal, then note...