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Section 446 Income Tax Act 2025: What Is the Penalty for Crypto-Asset Reporting Defaults?

Section 446 prescribes penalties for failing to furnish a required crypto-asset transaction statement, submitting inaccurate information without correcting it, or failing to comply with the due diligence requirements under Section 509.

Current law from 1 April 2026: Section 446 was substituted by Section 101 of the Finance Act, 2026. The earlier version concerning failure to get accounts audited is no longer the operative text of Section 446. Do not rely on older webpages showing the former audit penalty as current Section 446.

What does Section 446 provide?

Under Section 446(1), a person required to furnish a statement relating to a crypto-asset transaction under Section 509(1) may face a penalty of Rs. 200 for every day the failure continues if the statement is not furnished within the prescribed time. The prescribed income-tax authority under Section 509 is empowered to impose the penalty.

Under Section 446(2), the prescribed authority may impose a penalty of Rs. 50,000 on a person referred to in subsection (1) where that person either furnishes inaccurate information and fails to remove the inaccuracy as required by Section 509(4), or fails to comply with the due diligence requirement under Section 509(5).

How much is the penalty under Section 446?

DefaultProvisionPenalty
Failure to furnish a crypto-asset transaction statement within the prescribed timeSection 446(1) read with Section 509(1)Rs. 200 for each day of continuing default
Inaccurate statement information not corrected as requiredSection 446(2)(a) read with Section 509(4)Rs. 50,000
Failure to comply with due diligence requirementsSection 446(2)(b) read with Section 509(5)Rs. 50,000

Section 446(1) does not itself state a maximum monetary ceiling for the daily penalty. The authority's power is discretionary (the provision uses the word "may"), and the facts and applicable procedural protections must be considered.

Relevant statutory terms and cross-references

Crypto-asset transaction statement: A statement that a person covered by Section 509(1) must furnish in relation to transactions of crypto-assets, in the prescribed form, manner and time. Whether a particular person is covered depends on Section 509 and the applicable rules.
Prescribed income-tax authority: The authority designated under Section 509 to receive or administer the required information and to exercise the penalty powers under Section 446.
Inaccurate information: Information furnished in a Section 509 statement that is inaccurate and is not corrected in accordance with the obligation in Section 509(4). A mere error does not automatically establish every condition for the Section 446(2)(a) penalty.
Due diligence: The compliance obligation under Section 509(5), with its operative requirements determined by that section and applicable prescribed rules.
Crypto-asset: The asset category relevant to Section 509 reporting. The applicable statutory definition and rules should be consulted before determining whether a particular token or transaction is reportable.
Important distinction: Section 446 concerns reporting penalties. It is not, by itself, a provision fixing the income-tax rate on crypto-asset gains or imposing a penalty simply because someone owns a crypto-asset.

What should a reporting person do?

  1. Determine whether Section 509(1) applies to the person and transaction.
  2. Identify the prescribed statement, reporting period, due date and format.
  3. Maintain accurate transaction records and perform the due diligence required under Section 509(5).
  4. Submit the statement on time and preserve the filing acknowledgement.
  5. Where information is inaccurate, correct it using the process under Section 509(4) and retain evidence of the correction.
  6. If a penalty is proposed, examine the notice, calculation of days and the legal conditions before responding.

Examples of Section 446 penalties

Example 1: Late filing by 25 days

If a reporting person files a required statement 25 days late, the daily amount under Section 446(1) is 25 x Rs. 200 = Rs. 5,000, assuming the failure continued for all 25 days and the penalty is imposed.

Example 2: Uncorrected inaccurate statement

A reporting person submits inaccurate transaction information and does not correct it as required under Section 509(4). If the statutory conditions are met, the prescribed authority may impose Rs. 50,000 under Section 446(2)(a).

Example 3: Due diligence default

If a person covered by Section 446(1) fails to comply with the due diligence requirement in Section 509(5), the prescribed authority may impose Rs. 50,000 under Section 446(2)(b).

What changed under the Finance Act, 2026?

Section 101 of the Finance Act, 2026 substituted Section 446 with effect from 1 April 2026. The earlier text dealt with failure to obtain or furnish a tax audit report under Section 63 and contemplated a penalty equal to the lesser of 0.5% of turnover or receipts and Rs. 1,50,000. That former wording should not be presented as the current Section 446.

For tax audit filing defaults, consult the current Section 428 and the applicable audit provisions, rather than the superseded Section 446 text.

Frequently asked questions

Is every crypto-asset holder required to file a statement under Section 509?

Not necessarily. Section 446 applies to a person who is required to furnish a statement under Section 509(1). The reporting obligation must first be established.

Is the late-filing penalty Rs. 200 per day?

Yes. Section 446(1) provides for a penalty of Rs. 200 for each day of continuing failure, which the prescribed authority may impose.

What is the penalty for inaccurate crypto-asset information?

Section 446(2)(a) provides for Rs. 50,000 where inaccurate information is not corrected as required by Section 509(4).

Does Section 446 still impose a tax audit penalty?

No. Its former tax audit wording was replaced with effect from 1 April 2026 by the Finance Act, 2026.

Can the reporting default and inaccurate information default both matter?

The provisions address distinct statutory failures. The applicability of each depends on the facts and the specific requirements of Sections 446 and 509; liability should not be assumed without examining those conditions.

Official statutory sources

Income-tax Act 2025 as amendedFinance Act 2026Official Gazette

Last reviewed: 12 November 2026. This article is for general legal information; the statutory text and notified rules govern individual cases.