Section 271AAB of the Income-tax Act, 1961: Penalty on Undisclosed Income Found During Search
Section 271AAB sets out special penalties on undisclosed income of a specified previous year where a search was initiated under Section 132. The rate depends on the search date, disclosure made during the search, return filing and payment of tax and interest.
What is Section 271AAB?
Section 271AAB is a special penalty provision for certain undisclosed income detected in an income-tax search under Section 132 of the Income-tax Act, 1961. It is distinct from the general under-reporting or misreporting penalty under Section 270A and the earlier concealment penalty under Section 271(1)(c).
Section 271AAB penalty rates
| Search initiation period | Penalty rate on undisclosed income | Conditions |
|---|---|---|
| 1 July 2012 to 14 December 2016 | 10% - Section 271AAB(1)(a) | Admission under Section 132(4), manner specified and substantiated, tax and interest paid, and return declaring income filed by the specified date. |
| 1 July 2012 to 14 December 2016 | 20% - Section 271AAB(1)(b) | No admission in search statement, but undisclosed income declared in return and tax and interest paid by specified date. |
| 1 July 2012 to 14 December 2016 | 60% - Section 271AAB(1)(c) | Cases not covered by clauses (a) or (b), subject to the law applicable to the relevant case. |
| From 15 December 2016 under Section 271AAB(1A) | 30% - clause (a) | Admission in statement, manner specified and substantiated, and tax, interest and return requirements satisfied by specified date. |
| From 15 December 2016 under Section 271AAB(1A) | 60% - clause (b) | Cases not satisfying clause (a), where this provision governs. |
The table summarizes the provisions reproduced in the original webpage. Subsequent statutory amendments and the applicable commencement and transition rules must be checked before applying them to a particular search.
Conditions for the concessional penalty rate
For the lower rate under Section 271AAB(1A)(a), the assessee must satisfy all the specified requirements:
- Admit the undisclosed income in a statement recorded under Section 132(4) during the search.
- Specify how that income was derived.
- Substantiate the stated manner of deriving the income.
- Pay tax and applicable interest by the specified date.
- File the return for the specified previous year declaring that undisclosed income by the specified date.
Admission alone does not automatically satisfy the remaining statutory conditions. The evidence, search statement, return and payment records should be examined together.
Important statutory definitions
Undisclosed income
Under the Explanation to Section 271AAB, the expression covers qualifying income of the specified previous year represented by money, bullion, jewellery, valuables, entries, documents or transactions discovered in a search which were not recorded in the normal books or otherwise disclosed to the specified tax authorities before the search. It also covers qualifying false expense entries that would not have been discovered without the search.
Specified previous year
This generally means either the previous year in which the search took place, or an earlier previous year whose return-filing due date had not expired on the search date and for which the return had not yet been furnished.
Specified date
The original statutory Explanation refers to the due date for furnishing a return under Section 139(1), or the expiry of the period stated in a notice under Section 153A, as applicable. The procedural law applicable to the relevant search must be considered.
Relationship with other penalty provisions
Section 271AAB(2) bars an additional penalty under Section 270A or Section 271(1)(c) in respect of the same undisclosed income covered by Section 271AAB(1) or (1A). Sections 274 and 275, dealing with penalty procedure and limitation, apply as far as relevant. Whether a particular item qualifies as undisclosed income must be determined from the statutory definition and the evidence.
Illustrative penalty calculation
If qualifying undisclosed income is Rs. 10,00,000 and a 30% rate lawfully applies, the penalty is Rs. 3,00,000, separately from the applicable tax and interest. If the applicable rate is 60%, the penalty is Rs. 6,00,000. These are illustrations, not a determination of the rate for a particular assessment.
Current law and official legal sources
The Income-tax Act, 2025 has replaced the 1961 Act for the periods to which the new law applies, subject to savings and transitional provisions. Older searches and related proceedings may still require applying the 1961 Act. Check the enacted law and amendments rather than relying on an unqualified cross-reference between section numbers.
- Income Tax Department - Income-tax Act, 1961
- Income Tax Department - official portal
- India Code - central legislation and amendments
- Income Tax e-Filing portal
Section 271AAB: Original statutory material and legislative notes
The source webpage's substantive statutory provisions and amendment notes are retained below for historical reference. Numbered footnote markers and older wording in the source are not a substitute for the officially updated statute.
Read the statutory text reproduced in the original webpage
271AAB Income Tax Act - Penalty where search has been initiated Section 271aab of Income Tax Act 1961 - Penalty where search has been initiated 1(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 2 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum 3 computed at the rate of sixty per cent. of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). 2 (1A) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of thirty per cent of the undisclosed income of the specified previous year, if the assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a). (2) No penalty under the provisions of 4 section 270A or clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1) 5 or sub-section (1A). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the 6 Principal Chief Commissioner or Chief Commissioner or 7 Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.
Read the original legislative amendment notes
1. Ins. by Act 23 of 2012, s. 101 (w.e.f. 1-7-2012). 2. Ins. by Act 48 of 2016, s. 3 (w.e.f. 15-12-2016). 3. Subs. by Act 28 of 2016, s. 103, for "which shall not be less than thirty per cent. but which shall not exceed ninety per cent." (w.e.f. 1-4-2017). 4. Ins. by Act 28 of 2016, s. 103 (w.e.f. 1-4-2017). 5. Ins. by Act 48 of 2016, s. 3 (w.e.f. 15-12-2016). 6. Subs. by Act 25 of 2014, s. 4, for "Chief Commissioner" (w.r.e.f. 1-6-2013). 7. Subs. by s. 4, ibid., for "Commissioner" (w.r.e.f. 1-6-2013).
Frequently asked questions
Is Section 271AAB penalty always 60%?
No. The original provisions contain rates of 10%, 20%, 30% and 60%, depending on the date and circumstances. The applicable version of the law must be checked.
Does admitting income during a search automatically reduce the penalty?
No. The statutory requirements also address the manner of earning income, substantiation, tax and interest payments, and filing the return by the specified date.
Can Section 270A penalty also apply to the same undisclosed income?
Section 271AAB(2) contains a specific protection against overlapping penalties under Section 270A or Section 271(1)(c) in respect of undisclosed income covered by the specified Section 271AAB provisions.
This article provides general legal information. Search penalties are fact-sensitive and should be reviewed against the legislation and procedural rules applicable to the relevant period.