Income-tax law | Offences and prosecutions | Updated October 2026
Section 276C of the Income-tax Act, 1961: Wilful Attempt to Evade Tax
Section 276C concerns deliberate attempts to evade tax, penalty or interest, including under-reporting of income, and deliberate attempts to evade payment. The Finance Act, 2026 substantially revised the punishments, effective from 1 March 2026.
1. Meaning and scope of Section 276C
Section 276C(1) covers a person who wilfully attempts in any manner to evade tax, penalty or interest chargeable or imposable under the Act, or under-reports income. It is a criminal prosecution provision, separate from the administrative tax assessment and penalty process.
Section 276C(2) deals with a wilful attempt to evade payment of tax, penalty or interest. This is distinct from evading assessment or understating the underlying liability. The nature of the act and the evidence of deliberate intent matter.
The term wilful indicates deliberate conduct, not merely an inadvertent error. However, any defence, statutory presumption and burden of proof must be evaluated under the applicable law, including Section 278E where relevant.
2. Punishment after the Finance Act, 2026
Under the substituted Section 276C(1) and (2), the punishment is graded by the relevant amount sought to be evaded. The statutory language permits imprisonment, fine, or both for the two higher bands.
| Relevant amount | Punishment |
|---|---|
| More than Rs. 50 lakh | Simple imprisonment for up to two years, or fine, or both |
| More than Rs. 10 lakh but not more than Rs. 50 lakh | Simple imprisonment for up to six months, or fine, or both |
| Rs. 10 lakh or less | Fine |
These are the punishment categories in the revised statutory text; a court must still determine whether the offence is proved. Penalties under other applicable provisions may be imposed independently where the law permits.
3. Acts covered by the statutory Explanation
The Explanation to Section 276C identifies circumstances that may amount to a wilful attempt to evade tax, penalty, interest or payment. These include:
- Possession or control of relevant books of account or documents containing a false entry or statement.
- Making, or causing another person to make, a false entry or statement in relevant records.
- Wilfully omitting, or causing the omission of, a relevant entry or statement.
- Creating another circumstance that enables evasion of the chargeable amount or its payment.
These examples do not dispense with the need to apply the statutory requirements to the particular facts.
4. Practical illustrations
Deliberate suppression of sales
Knowingly omitting substantial sales from business books to reduce taxable income may give rise to questions under Section 276C(1), subject to proof of the offence and the applicable assessment facts.
Concealment of assets to avoid recovery
Deliberately moving assets to prevent payment of a known tax liability may raise issues under Section 276C(2), potentially alongside separate recovery-related provisions.
Clerical mistake corrected in good faith
An isolated clerical error does not by itself establish a wilful attempt. The evidence of intention and surrounding conduct remains critical.
5. Earlier punishment provisions and legislative history
Before the 2026 substitution, Section 276C(1) provided rigorous imprisonment of six months to seven years with fine where the amount sought to be evaded, or tax on under-reported income, exceeded Rs. 25 lakh. Other cases carried rigorous imprisonment of three months to two years with fine. The former Section 276C(2) prescribed rigorous imprisonment of three months to two years and a fine at the court's discretion.
The provision has undergone earlier amendments, including the Finance Act, 2012 (threshold and sentencing changes) and Finance Act, 2016 (express reference to under-reported income). The original page's historical amendment references are preserved here in explanatory form, rather than as footnote markers embedded in the law.
6. Relationship with the Income-tax Act, 2025
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. Section 478 of the 2025 Act, as amended by the Finance Act, 2026, covers wilful tax evasion and wilful evasion of payment using comparable graded punishment categories. The repeal and savings provisions in Section 536 of the 2025 Act are relevant when determining the treatment of earlier proceedings and liabilities. The date of the alleged conduct and the applicable statutory text must be checked before reaching conclusions about prosecution or punishment.
7. Prosecution and compliance considerations
Prosecution is distinct from tax assessment, recovery and civil penalties. Questions of sanction under Section 279, the presumption concerning culpable mental state under Section 278E, and any available compounding or immunity provisions require case-specific review. Paying tax after discovery does not automatically answer every criminal-law question, nor does an assessment addition alone establish wilfulness.
Businesses and individuals should maintain accurate books, preserve underlying evidence, reconcile tax returns with accounting records, respond to notices and obtain legal advice promptly where a criminal complaint is contemplated.
8. Frequently asked questions
What is Section 276C of the Income-tax Act, 1961?
It addresses a wilful attempt to evade tax, penalty or interest, including under-reporting of income, and a wilful attempt to evade payment of those amounts.
What is the punishment after the Finance Act, 2026?
Where the relevant amount exceeds Rs. 50 lakh, simple imprisonment up to two years, a fine, or both may apply; above Rs. 10 lakh and up to Rs. 50 lakh, simple imprisonment up to six months, a fine, or both; in other cases, a fine.
Is an accidental mistake automatically tax evasion?
No. Section 276C concerns a wilful attempt. Whether the required intent and conduct are established depends on evidence and the applicable legal presumptions.
Which provision applies under the Income-tax Act, 2025?
Section 478 addresses wilful attempts to evade tax and payment under the Income-tax Act, 2025, as amended by the Finance Act, 2026.
9. Official statutory references
- Finance Act, 2026 - Section 26 (substitution of Section 276C)
- Income Tax Department - Section 276C (earlier statutory text)
- Income-tax Act, 1961 as amended by Finance Act, 2025 (PDF)
- Income-tax Act, 2025 as amended by Finance Act, 2026 (Section 478)
- Income Tax Department - Penalties and prosecutions
Editorial note: This article provides general legal information as of October 2026. For any specific prosecution, examine the authenticated statute, effective dates, notifications and applicable judicial decisions.