Section 440 Income Tax Act 2025: How to Obtain Penalty Waiver and Prosecution Immunity?
Section 440 of the Income-tax Act, 2025 provides a statutory route for eligible taxpayers to seek waiver of penalty for under-reporting or misreporting of income and immunity from specified prosecution proceedings. The Finance Act, 2026 significantly expanded this relief, subject to strict payment and procedural conditions.
What relief does Section 440 provide?
Under Section 440(1), an assessee may apply to the Assessing Officer for waiver of penalty levied under Section 439 and immunity from initiation of proceedings under Sections 478 or 479. This is a conditional statutory remedy, not an automatic cancellation of tax or an unrestricted amnesty from all offences.
Section 439 deals with penalties for under-reporting and misreporting of income. Section 440 creates a separate procedure to seek relief after satisfying the requirements of the amended provision. Its predecessor under the Income-tax Act, 1961 was Section 270AA, although the amended 2025 provision must be read on its own terms.
What conditions must a taxpayer satisfy?
1. Pay assessed tax and interest on time
Under Section 440(1)(a), the tax and interest payable under an assessment order under Section 270(10), or reassessment order under Section 279, must be paid within the period stated in the notice of demand.
2. Pay additional income-tax for specified misreporting
For penalties levied in the circumstances covered by Section 439(11)(a) to (f), Section 440(1)(b) requires additional income-tax equal to 100% of the tax payable on the under-reported income, paid within the demand period in lieu of the penalty.
For the circumstance covered by Section 439(11)(g), Section 440(1)(c) instead requires additional income-tax equal to 120% of the tax payable on the under-reported income, paid within the demand period in lieu of the penalty.
The additional tax is computed by reference to the tax payable on under-reported income, not as 100% or 120% of the total assessed income or of the ordinary tax demand.
3. Do not file an appeal against the relevant orders
Section 440(1)(d) requires that no appeal has been filed against the relevant assessment or reassessment order and the levy of penalty. A taxpayer should evaluate the merits of any proposed appeal before choosing this route because acceptance has statutory consequences for appellate and revision remedies.
How to apply under Section 440
- Review the orders: identify the assessment or reassessment order, the Section 439 penalty order and applicable notice of demand.
- Verify payment: ensure assessed tax, interest and, where applicable, additional income-tax are paid within the demand period.
- Check the appeal position: confirm the condition that no appeal has been filed against the relevant orders.
- Submit the prescribed application: Section 440(2) requires filing within one month from the end of the month in which the relevant order is received, in the prescribed form and verified in the prescribed manner.
- Await the decision: after the appeal-filing period specified in Section 358(3)(a) expires and conditions are satisfied, the Assessing Officer is required under Section 440(3) to grant the specified relief, subject to Section 440(4).
Decision deadline and hearing
Under Section 440(5), the Assessing Officer must pass an order accepting or rejecting the application within three months from the end of the month in which the application is received. Section 440(6) prohibits rejection without giving the assessee an opportunity of being heard. Section 440(7) states that the order is final.
When is waiver or immunity unavailable?
Section 440(4) prevents waiver or immunity under subsection (3) if any proceeding has already been initiated under Chapter XXII (Offences and Prosecutions). The taxpayer must therefore verify the status of prosecution proceedings, rather than assume payment alone guarantees immunity.
Effect on appeals and revision
Where the application is accepted, Section 440(8) bars an appeal under Section 356 or 357 or an application for revision under Section 378 against the assessment or reassessment order specified in Section 440(1)(a). The precise effect on a particular case depends on the orders and procedural history.
Relevant statutory terms
Illustrative calculations
Example A - Section 439(11)(a) to (f): Assume the tax payable on under-reported income is Rs. 80,000. The additional income-tax for the Section 440 waiver route would be Rs. 80,000 (100%), apart from the assessed tax and interest otherwise payable. This assumes all other conditions are met.
Example B - Section 439(11)(g): If the tax payable on under-reported income is Rs. 80,000, the additional income-tax would be Rs. 96,000 (120%), apart from the assessed tax and interest otherwise payable.
Example C - filing deadline: If the relevant order is received on 12 August 2026, the one-month period measured from the end of August ordinarily runs through 30 September 2026. Actual filing should follow the prescribed procedural rules and any applicable statutory extensions.
Frequently asked questions
Can penalty for misreporting be waived under Section 440?
Yes, specified misreporting cases are included under the Finance Act, 2026 amendment, provided the applicable additional income-tax of 100% or 120% and all other statutory conditions are satisfied.
Does payment of additional income-tax replace the entire tax demand?
No. The additional income-tax is a separate condition for the waiver route. Assessed tax and interest must also be paid as required by Section 440(1)(a).
What is the application deadline?
One month from the end of the month in which the relevant order is received, subject to the prescribed form and verification requirements under Section 440(2).
Can I appeal and simultaneously seek Section 440 relief?
The statutory condition in Section 440(1)(d) requires that no appeal has been filed against the relevant assessment or reassessment and penalty orders. Legal advice should be obtained before choosing between remedies.
Does Section 440 stop prosecution proceedings already initiated?
No. Section 440(4) expressly excludes relief where a proceeding has been initiated under Chapter XXII.
How quickly must the Assessing Officer decide?
The order accepting or rejecting the application must be passed within three months from the end of the month of receipt of the application.
Official statutory references
Read Section 440 together with Sections 439, 478, 479 and 358. The statutory text and prescribed procedural requirements prevail over general summaries.
Last reviewed: 12 November 2026. This article is general legal information, not case-specific advice.