Income-tax law | Historical settlement provisions | Updated October 2026
Section 245H of the Income-tax Act, 1961: Immunity from Prosecution and Penalty
Section 245H governed the Income-tax Settlement Commission's discretionary power to grant qualifying settlement applicants immunity from prosecution and, wholly or partly, from income-tax penalties. This guide explains the legal requirements, exclusions, withdrawal of immunity and present transitional relevance.
What is Section 245H?
Under Chapter XIX-A of the Income-tax Act, 1961, Section 245H authorised the Settlement Commission to grant immunity in connection with the case covered by the settlement. It did not create a general amnesty or an automatic right to immunity. The statutory discretion was tied to the applicant's conduct, disclosures and the conditions stated in the settlement order.
Immunity from prosecution means protection, to the extent lawfully granted, against criminal proceedings for specified offences. Immunity from penalty means relief from monetary penalties otherwise imposable under the Income-tax Act, whether wholly or partly. These are distinct from the obligation to pay tax and interest.
Section 245H(1): Conditions for granting immunity
The historical provision required the Commission to be satisfied that the applicant had:
- made an application for settlement under Section 245C;
- co-operated with the Commission in the proceedings;
- made a full and true disclosure of income and the manner in which it was derived; and
- met any additional conditions imposed by the Commission.
The Commission was required to record its reasons in writing. A settlement order under Section 245D(4) and any conditions attached to immunity must be read together.
Meaning of full and true disclosure
Full and true disclosure concerns material income facts and how the income arose. Incomplete or misleading particulars can affect the availability and continuing validity of immunity. The mere fact that additional income-tax was offered for settlement did not automatically satisfy this condition.
Restrictions on immunity from prosecution
| Restriction | Legal effect under the historical provision |
|---|---|
| Prosecution already instituted | Immunity could not be granted where prosecution proceedings for the offence had been instituted before receipt of the Section 245C application. |
| Applications on or after 1 June 2007 | The Commission could not grant immunity from prosecution under the Indian Penal Code or Central Acts other than the Income-tax Act and the Wealth-tax Act, 1957. |
| Case covered by settlement | The relief was confined to the relevant settlement case and was subject to the terms of the order. |
| Tax and interest | Immunity from penalty or prosecution did not itself discharge sums payable under the settlement. |
References in the original statutory wording to the Indian Penal Code reflect the law and wording applicable to the historical provision. The Bharatiya Nyaya Sanhita, 2023 replaced the Indian Penal Code for the general criminal-law framework from 1 July 2024, subject to savings. This does not enlarge the scope of immunity that Section 245H historically permitted.
Section 245H(1A) and (2): When immunity is withdrawn
Automatic withdrawal under sub-section (1A)
Immunity stood withdrawn if the person failed to pay a sum specified in the settlement order within the prescribed or permitted extended time, or failed to comply with another condition attached to the immunity. The Income-tax Act then applied as if the immunity had not been granted.
Discretionary withdrawal under sub-section (2)
The Commission could withdraw immunity if satisfied that the person had concealed particulars material to settlement or had given false evidence during settlement proceedings. The person could then face prosecution for relevant offences and penalties otherwise applicable under the Act.
These consequences make it important to distinguish a final settlement order from unconditional, permanent protection: statutory withdrawal provisions could still apply.
Illustrative example
An eligible applicant historically disclosed previously undisclosed income, co-operated fully, and received a settlement order granting partial penalty immunity subject to payment of tax by a specified date. If the applicant failed to pay within the permitted period, the immunity could stand withdrawn under Section 245H(1A). Conversely, payment alone would not cure a later finding of material concealment or false evidence under Section 245H(2).
This example explains the former statutory mechanism and is not a procedure for making a fresh settlement application in 2026.
Historical text of Section 245H and amendment notes
The following source text is retained for legal research. It contains historical editorial footnote markers and should be read with the applicable amendments and transitional provisions.
Show original Section 245H text and legislative notes
(1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose 1 for the reasons to be recorded in writing, immunity from prosecution for any offence under this Act or under the Indian Penal Code (45 of 1860) or under any other Central Act for the time being in force 2 and also (either wholly or in part) from the imposition of any penalty under this Act, with respect to the case covered by the settlement:
3 Provided that no such immunity shall be granted by the Settlement Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application under section 245C:
4 Provided further that the Settlement Commission shall not grant immunity from prosecution for any offence under the Indian Penal Code (45 of 1860) or under any Central Act other than this Act and the Wealth-tax Act, 1957 (27 of 1957) to a person who makes an application under section 245C on or after the 1st day of June, 2007.
3 (1A) An immunity granted to a person under sub-section (1) shall stand withdrawn if such person fails to pay any sum specified in the order of settlement passed under sub-section (4) of section 245D within the time specified in such order or within such further time as may be allowed by the Settlement Commission, or fails to comply with any other condition subject to which the immunity was granted and thereupon the provisions of this Act shall apply as if such immunity had not been granted.
(2) An immunity granted to a person under sub-section (1) may, at any time, be
withdrawn by the Settlement Commission, if it is satisfied that such person 5
*** had, in the course of the settlement proceedings, concealed any particulars
material to the settlement or had given false evidence, and thereupon such
person may be tried for the offence with respect to which the immunity was
granted or for any other offence of which he appears to have been guilty in
connection with the settlement and shall also become liable to the imposition of
any penalty under this Act to which such person would have been liable, had not
such immunity been granted.
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1. Ins. by Act 20 of 2015, s. 60 (w.e.f. 1-6-2015).
2. Subs. by Act 67 of 1984, s. 43, for "and also from the imposition of any
penalty" (w.e.f. 1-10-1984).
3. Ins. by Act 11 of 1987, s. 64 (w.e.f. 1-6-1987).
4. Ins. by Act 22 of 2007, s. 68 (w.e.f. 1-6-2007).
5. The words "has not complied with the conditions subject to which the immunity
was granted or that such person" omitted by Act 11 of 1987, s. 64 (w.e.f.
1-6-1987).
Frequently asked questions
Does Section 245H allow a new settlement application in 2026?
No. The Income-tax Settlement Commission ceased accepting new settlement applications from 1 February 2021. Section 245H remains relevant to historical orders and eligible transitional proceedings.
Was immunity automatic under Section 245H?
No. It was discretionary, conditional and required cooperation, full and true disclosure and recorded reasons.
Could the Settlement Commission waive all penalties?
The provision allowed full or partial immunity from penalties under the Income-tax Act in the case covered by the settlement, subject to statutory conditions.
When could immunity be withdrawn?
Immunity stood withdrawn for failure to pay settlement sums within the permitted time or failure to comply with conditions, and could be withdrawn where material facts were concealed or false evidence given.
Did immunity cover prosecution already instituted?
No. The historical provision excluded immunity where prosecution proceedings had been instituted before receipt of the settlement application.
Official legal references
- Income Tax Department of India — legislation, circulars and tax guidance.
- India Code — central legislation and statutory texts.
- Gazette of India — enacted legislation and notifications.
- Income Tax e-Filing Portal — official taxpayer services.
For a particular historical settlement or transitional case, consult the statute, relevant Finance Acts, notifications, and the order applicable to that case.