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Section 270A of Income Tax Act: Penalty for Under Reporting and Misreporting of Income

Section 270A of the Income-tax Act, 1961 introduced a penalty regime for under-reporting and misreporting of income with effect from assessment year 2017-18. The ordinary penalty is 50 percent of the tax payable on under-reported income, while misreporting attracts a penalty equal to 200 percent of the tax payable on the under-reported income.

What is under-reporting of income?

Under section 270A, under-reporting broadly arises where the income assessed exceeds the income determined in the return processing, where assessed income exceeds the applicable threshold in a case in which no return was furnished, where reassessed income exceeds the income assessed or reassessed immediately before the reassessment, or where an assessment or reassessment reduces a returned loss or converts that loss into income. The section also contains corresponding rules for deemed total income under the MAT and AMT provisions.

Penalty rate under Section 270A

What amounts to misreporting of income?

Section 270A(9) identifies specified cases of misreporting. These include:

• misrepresentation or suppression of facts;
• failure to record investments in the books of account;
• claim of expenditure not substantiated by evidence;
• recording a false entry in the books of account;
• failure to record a receipt in the books of account having a bearing on total income; and
• failure to report an international transaction, a transaction deemed to be an international transaction, or a specified domestic transaction to which Chapter X applies.

Amounts excluded from under-reported income

Section 270A(6) protects specified amounts from being treated as under-reported income. Important exclusions include an amount for which the assessee gives a bona fide explanation and discloses all material facts; certain estimated additions where the accounts are correct and complete; certain estimates already made by the assessee with full disclosure of material facts; qualifying transfer-pricing additions where prescribed records and disclosures were maintained; and undisclosed income referred to in section 271AAB.

How under-reported income is computed

The computation depends on whether income is assessed for the first time, whether a return was furnished, whether the case concerns reassessment, and whether deemed total income under section 115JB or section 115JC is involved. Section 270A(3) contains the principal computation rules, while sub-sections (4) and (5) deal with certain receipts, deposits or investments linked to additions made in preceding years.

Tax payable on under-reported income

Section 270A(10) prescribes how the tax attributable to under-reported income is calculated. Different rules apply where no return was furnished, where the preceding determination is a loss, and in other cases. The penalty percentage is then applied to the tax payable on the under-reported income rather than directly to the amount of the addition.

No duplicate penalty on the same addition

Section 270A(11) provides that an addition or disallowance cannot form the basis for imposition of penalty if that addition or disallowance has already formed the basis for imposition of penalty in the case of the same person for the same or another assessment year.

Authority competent to impose penalty

Under section 270A(1) and (12), the prescribed income-tax authorities may direct and impose the penalty by an order in writing during proceedings under the Act. The statutory text applicable to the relevant assessment year should be checked because the description of appellate authorities has been amended over time.

Immunity and waiver under Section 270AA

Section 270AA contains a separate statutory mechanism for immunity from imposition or waiver of penalty under section 270A and immunity from initiation of proceedings under sections 276C or 276CC, subject to its conditions. The provision was materially amended in 2026, including in relation to circumstances covered by section 270A(9). Eligibility must therefore be examined under the version of section 270AA applicable to the proceeding.

Section 273A and discretionary waiver

Section 273A separately gives the Principal Commissioner or Commissioner statutory powers to reduce or waive specified penalties in circumstances and subject to conditions stated in that section. It should not be treated as an automatic immunity merely because an assessee cooperates with the department. The statutory requirements applicable to the particular penalty and assessment year must be satisfied.

Section 270A provisions at a glance

Official resources

• Income Tax Department - Section 270A
• Income Tax Department - Income-tax Act, 2025 and transition resources
• Income Tax e-Filing Portal

Related provisions

• Section 270AA - Immunity from penalty and prosecution
• Sections 251 to 270
• Sections 271 to 298

For a proceeding spanning the transition to the Income-tax Act, 2025, the applicable repeal, savings and corresponding provisions should be checked before relying on a section number from the Income-tax Act, 1961.