Section 460 Income Tax Act 2025: What Is the Penalty for Late Filing of a Liaison Office Statement?
A non-resident with a liaison office in India must submit an annual activity statement under Section 505. Section 460 sets out the consequences when that statement is not furnished within the prescribed time.
What does Section 460 of the Income-tax Act, 2025 provide?
Section 460 is titled Penalty for failure to submit statement under section 505. It applies when a person required to furnish a statement under Section 505 does not furnish it within the time prescribed for that statement. The Assessing Officer may impose a penalty under this provision.
It is a reporting-default penalty, not a tax on the liaison office's receipts or a general penalty for every breach of RBI conditions. The reporting obligation must first arise under Section 505.
How much penalty can be imposed under Section 460?
| Period of default | Penalty provided |
|---|---|
| Failure continuing for not more than three months | Rs. 1,000 for every day of failure |
| Failure continuing beyond three months | Rs. 1,00,000 |
The statutory wording provides alternative penalty categories: the Rs. 1,00,000 amount applies in the second category; it should not automatically be added to the daily penalty. Section 460 says the Assessing Officer may impose the penalty, subject to other applicable safeguards.
Who must file the statement under Section 505?
Section 505 applies to a non-resident person having a liaison office in India established in accordance with Reserve Bank of India guidelines under the Foreign Exchange Management Act, 1999. Such a person must furnish a statement of the liaison office's activities to the jurisdictional Assessing Officer.
Form 162 and filing deadline under Rule 234
Rule 234 of the Income-tax Rules, 2026 prescribes Form No. 162 as the annual statement and requires it to be furnished within eight months from the end of the financial year. The statement is to be furnished electronically with a digital signature and verified by a chartered accountant or an authorised signatory as provided in the rule.
For example, for a financial year ending on 31 March 2027, the ordinary eight-month deadline would be 30 November 2027, subject to any applicable extension or change in law.
Relevant statutory terms explained
Examples of penalty calculation
Example 1: Delay of 12 days
A non-resident liaison office submits Form 162 twelve days after the due date. The amount calculated under Section 460(a) is 12 x Rs. 1,000 = Rs. 12,000, before considering reasonable-cause relief and statutory procedure.
Example 2: Delay of 45 days
Where the failure continues for 45 days, which is within three months, the amount calculated under Section 460(a) is Rs. 45,000.
Example 3: Delay beyond three months
Where the failure continues beyond three months, Section 460(b) provides for a Rs. 1,00,000 penalty rather than an indefinitely increasing daily amount under clause (a).
These examples illustrate the statutory formula and do not predict the outcome of a particular penalty proceeding.
Can the penalty be avoided if there was reasonable cause?
Yes, where the statutory conditions are satisfied. Section 470 includes Section 460 among the defaults for which penalty is not to be imposed if the person proves reasonable cause for the failure. A liaison office should preserve contemporaneous documents supporting the cause of delay, its corrective steps and the actual date of filing.
Opportunity of hearing
Section 471 provides procedural safeguards for penalty orders, including an opportunity of being heard. Where a notice is received, the person should respond within the stipulated time, supply the filing acknowledgement and explain any reasonable cause with evidence.
Practical compliance checklist
- Confirm whether the Indian establishment is a liaison office covered by Section 505.
- Prepare and verify Form 162 for the relevant financial year.
- File electronically within the Rule 234 deadline and retain the acknowledgement.
- Keep RBI approval, FEMA compliance records and supporting activity information.
- If delayed, file promptly and preserve documentary proof of the cause and duration of delay.
Frequently asked questions
Does Section 460 apply to every foreign company in India?
No. It applies to a person required to furnish the Section 505 statement, principally a non-resident having a liaison office in India within the specified RBI framework.
Is the penalty Rs. 1,000 per day without any limit?
No. The daily amount applies where the failure does not exceed three months. A failure beyond three months falls under the separate Rs. 1,00,000 category.
What form is required for liaison office reporting?
Form 162 under Rule 234 of the Income-tax Rules, 2026.
Can the Assessing Officer impose the penalty automatically?
The penalty is not automatic merely because a due date has passed. The authority must follow applicable procedure, including the opportunity of hearing, and consider proven reasonable cause under Section 470.
What was the corresponding provision under the Income-tax Act, 1961?
Section 271GC dealt with penalty for failure to submit a statement under Section 285 of the 1961 Act.
Official statutory references
Read Sections 460, 505, 470 and 471 together with Rule 234. Check subsequent notifications and amendments for the applicable filing period.
Last reviewed: 12 November 2026. This article provides general legal information and does not replace advice based on specific facts.