Indian Income-tax Law | Penalties | Updated 28 October 2026
Section 271FAB: Penalty for Failure to Furnish Information by an Eligible Investment Fund
Section 271FAB of the Income-tax Act, 1961 provides a fixed penalty of Rs. 5,00,000 for an eligible investment fund that fails to furnish the statement, information or documents required under section 9A(5) within the prescribed time. The corresponding provision from 1 April 2026 is section 456 of the Income-tax Act, 2025.
1. Meaning and scope of section 271FAB
Section 271FAB concerns the compliance obligation of an eligible investment fund benefiting from the special framework for offshore funds managed through an eligible fund manager in India. It does not create a general penalty on all investment funds or all investment returns.
Statutory provision under the Income-tax Act, 1961
Where an eligible investment fund required to furnish a statement or information or document under section 9A(5) fails to do so within the prescribed time, the prescribed income-tax authority may direct that the fund pay a penalty of five hundred thousand rupees. This is the substance of section 271FAB, inserted by section 73 of the Finance Act, 2015 with effect from 1 April 2016.
2. What is an eligible investment fund?
Section 9A provides a conditional safe-harbour framework for certain investment funds established or registered outside India. Broadly, eligible fund management activity undertaken through an eligible fund manager in India does not, by itself, constitute a business connection of the offshore fund in India; nor does the fund become resident merely because the eligible fund manager is located in India. These outcomes depend on satisfying the detailed statutory conditions.
Section 9A(3) sets out conditions relating to the fund, its investors, regulatory position and other matters, while section 9A(4) specifies conditions for an eligible fund manager. Eligibility must be examined against the version of law applicable to the relevant year; this article does not treat the safe harbour as automatic.
3. Reporting requirement under section 9A(5)
Under section 9A(5) of the 1961 Act, every eligible investment fund must furnish, within 90 days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority, describing its activities and compliance with the conditions in section 9A. It must also provide other relevant information or documents as prescribed.
For a financial year ending 31 March, the 90-day period ordinarily ends on 29 June, subject to any applicable extension, specific procedural rule or statutory change. Funds should verify the applicable prescribed form and filing procedure for their period, including the reporting requirements under the Income-tax Rules.
4. Penalty amount and when it applies
| Question | Section 271FAB position |
|---|---|
| Who may be liable? | An eligible investment fund required to furnish the prescribed statement, information or documents. |
| What triggers the provision? | Failure to furnish the required material within the prescribed time under section 9A(5). |
| Penalty amount | Rs. 5,00,000 (fixed amount; not a per-day rate). |
| Authority | The income-tax authority prescribed under section 9A(5) may direct payment. |
| Possible relief | Reasonable cause may be relevant under section 273B for defaults governed by the 1961 Act. |
Illustration
Assume a qualifying offshore fund was required to submit its section 9A(5) statement for an applicable financial year and failed to do so within the prescribed deadline. If the statutory conditions for imposing section 271FAB are met and no available defence succeeds, the prescribed authority may direct a penalty of Rs. 5,00,000. The amount is not calculated by multiplying days of delay.
5. Reasonable cause and procedural safeguards
For the 1961 Act, section 273B provides that a penalty under specified provisions, including section 271FAB, is not imposable where the person proves reasonable cause for the failure. Whether circumstances constitute reasonable cause depends on contemporaneous evidence and the facts of the case.
Records that may be relevant include filing acknowledgments, technical incident reports, correspondence with the prescribed authority, proof of attempted submission, details of unavoidable circumstances and the timeline of corrective action. The opportunity of being heard and the applicable penalty procedure should also be considered.
6. Corresponding law from 1 April 2026: section 456
Section 456 of the Income-tax Act, 2025 deals with failure by an eligible investment fund to furnish a statement, information or document required under paragraph 4 of Schedule I within the time prescribed there. The prescribed income-tax authority may direct a penalty of Rs. 5,00,000.
The 2025 Act reorganises the earlier section 9A reporting framework into Schedule I. A reporting obligation or default spanning the transition should be assessed under the operative law and its repeal-and-savings provisions, rather than assuming that the section number alone determines liability.
7. Section 271FAB and section 456 compared
| Feature | 1961 Act | 2025 Act |
|---|---|---|
| Penalty provision | Section 271FAB | Section 456 |
| Underlying reporting rule | Section 9A(5) | Paragraph 4 of Schedule I |
| Penalty | Rs. 5,00,000 | Rs. 5,00,000 |
| Applicable periods | Relevant obligations governed by the 1961 Act, subject to savings | Obligations governed by the 2025 Act from its commencement, subject to transition |
8. Legislative background
Section 271FAB was inserted by the Finance Act, 2015 (Act 20 of 2015), section 73, with effect from 1 April 2016. The provision supported the reporting obligations introduced for eligible offshore investment funds under section 9A. The Income-tax Act, 2025, effective 1 April 2026, carries forward the corresponding penalty in section 456.
9. Compliance checklist for fund administrators
- Determine whether the fund qualifies as an eligible investment fund for the relevant period.
- Review the conditions governing the fund and its eligible fund manager.
- Identify the applicable annual reporting deadline and prescribed form.
- Maintain supporting documents demonstrating compliance with eligibility conditions.
- Submit the statement and preserve filing acknowledgments.
- Promptly respond to any request for additional information and document genuine obstacles to timely filing.
10. Frequently asked questions
What is the penalty under section 271FAB?
A fixed penalty of Rs. 5,00,000 may be directed for failure by an eligible investment fund to furnish the prescribed statement, information or documents within the required time.
What is the deadline under section 9A(5)?
Under the 1961 Act, an eligible investment fund must furnish the prescribed annual statement within 90 days from the end of the financial year.
Which law applies from 1 April 2026?
Section 456 of the Income-tax Act, 2025 addresses the corresponding failure, referring to paragraph 4 of Schedule I. The applicability of the old or new provision depends on the relevant period and transitional rules.
Is the penalty charged per day?
No. The specified amount under section 271FAB is Rs. 5,00,000, not a daily-rate penalty.
Can reasonable cause be relevant?
Section 273B of the 1961 Act includes section 271FAB in its reasonable-cause protection. Whether relief is available depends on the evidence and governing law.
11. Official legislative references
- Income Tax Department: Section 9A, Income-tax Act, 1961
- Income Tax Department: Income-tax Act, 1961, as amended by Finance Act, 2025 (section 271FAB)
- Income Tax Department: Income-tax Act, 2025 (section 456 and Schedule I)
- Income Tax Department: Penalties and prosecutions guidance
- India Code: Central legislation repository