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Section 455 Income Tax Act 2025: What Is the Penalty for Incorrect SFT Reporting?

Section 455 addresses inaccurate statements of financial transaction (SFT) and reportable accounts. It sets out a Rs. 50,000 penalty for specified reporting failures and an additional Rs. 5,000 per inaccurate reportable account in defined circumstances.

Updated: 12 November 2026 | Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026

Legal position: Section 455 has applied from 1 April 2026. Read it together with the reporting and due diligence obligations in Section 508, and the reasonable-cause safeguard in Section 470.

What does Section 455 of the Income-tax Act, 2025 provide?

Section 455 is titled Penalty for furnishing inaccurate statement of financial transaction or reportable account. It is aimed at persons obliged to furnish statements under Section 508(1), including reporting financial institutions covered by that section. The section deals with incorrect information, non-correction within the statutory period and failure to follow prescribed due diligence.

Section 455 explained sub-section by sub-section

Section 455(1): Rs. 50,000 penalty

The prescribed income-tax authority referred to in Section 508 may direct a person required to furnish a statement under Section 508(1) to pay Rs. 50,000 if the person:

  • provides inaccurate information in the statement or fails to furnish correct information within the period specified under Section 508(8); or
  • fails to comply with the due diligence requirement under Section 508(9).

The penalty is a specified sum, not a daily penalty under this sub-section. Whether it is leviable depends on the relevant facts and statutory conditions.

Section 455(2): Additional Rs. 5,000 per inaccurate reportable account

A reporting financial institution referred to in Section 508(1)(k) is subject to an additional Rs. 5,000 for every inaccurate reportable account where both conditions are satisfied: the institution furnished inaccurate information in its Section 508(1) statement, and that inaccuracy resulted from false or inaccurate information furnished by the relevant account holder or holders.

This additional amount may apply alongside the penalty under Section 455(1), if applicable. It should not be assumed to apply to every error in an SFT.

Section 455(3): Recovery from account holders

The reporting financial institution may recover the amount paid under Section 455(2) on behalf of the reportable account holder, or retain an equivalent amount from money in its possession or subsequently received from the relevant account holder. This recovery mechanism relates to the additional penalty under sub-section (2).

Important statutory terms and cross-references

Statement of financial transaction (SFT): A statement of prescribed financial transactions required from specified reporting persons under Section 508. The exact reporting scope and particulars depend on the Act and applicable rules.
Reportable account: An account falling within the reportable-account framework under Section 508 and the applicable reporting and due diligence rules. It is not synonymous with every bank account.
Reporting financial institution: A financial institution within the category referred to in Section 508(1)(k), subject to applicable statutory and regulatory definitions.
Due diligence: The verification and identification obligations prescribed under Section 508(9) and applicable rules for reporting purposes.
Correction obligation: Section 508(8) governs the furnishing of correct information in circumstances contemplated by that provision.

How is the Section 455 penalty calculated?

Illustration 1: A reporting person furnishes inaccurate information and the statutory conditions of Section 455(1) are met. The specified penalty is Rs. 50,000, subject to applicable relief and procedure.
Illustration 2: A reporting financial institution has three inaccurate reportable accounts, each meeting both conditions of Section 455(2). The additional amount is 3 x Rs. 5,000 = Rs. 15,000. If Section 455(1) also applies, the combined amount may be Rs. 65,000. This is an illustration, not an automatic assessment.

How can reporting persons reduce penalty exposure?

  • Check whether Section 508 requires the entity to file an SFT or reportable account statement.
  • Validate identification particulars, transaction amounts and reportable-account classifications before filing.
  • Follow applicable due diligence rules and maintain supporting records.
  • Correct discovered inaccuracies within the time prescribed under Section 508(8).
  • Retain records of information supplied by account holders and the verification performed.
  • Respond promptly to statutory communications and preserve evidence of reasonable cause, where relevant.

Does reasonable cause provide relief?

Yes, where proved. Section 470 expressly includes Section 455 among the provisions for which penalty shall not be imposed if the person proves reasonable cause for the relevant failure. The availability of this protection depends on the evidence and circumstances; it is not an automatic waiver.

Section 454 versus Section 455

Section 454 concerns failure to furnish a required statement or reportable account after a notice under Section 508(7). Section 455 instead concerns inaccurate information, failure to correct information and due diligence failures. The statutory triggers and penalty calculations differ.

Frequently asked questions

What is the penalty for inaccurate SFT reporting under Section 455?

Section 455(1) provides for a penalty of Rs. 50,000 when its statutory conditions are met.

Is there a separate penalty for inaccurate reportable accounts?

Yes. Under Section 455(2), a reporting financial institution is liable to an additional Rs. 5,000 for every inaccurate reportable account when the specified conditions are satisfied.

Can a reporting financial institution recover the additional penalty?

Section 455(3) allows recovery from, or retention of an equivalent amount belonging to, the relevant reportable account holder.

Can reasonable cause prevent a Section 455 penalty?

Section 470 provides that no penalty is imposed for a covered failure if the person proves reasonable cause.

Official legislation and further reading

Official amended Income-tax Act, 2025Income-tax Act, 2025 GazetteIncome Tax e-Filing Portal

Editorial note: This article provides general legal information. Read the statutory text and applicable rules for the relevant reporting period before making a compliance or litigation decision.