Section 278 of the Income Tax Act: Abetment of False Return and Punishment
Updated: 28 October 2026 | Includes Finance Act, 2026 amendments
Section 278 deals with knowingly assisting or inducing another person to submit a false income-tax account, statement or declaration, or to commit a wilful tax-evasion offence. The provision also covers abetment even where the accused is not the person filing the return.
1. Meaning and scope of Section 278
Under section 278 of the Income-tax Act, 1961, a person may be prosecuted for abetting or inducing another person, in any manner, to make and deliver an account, statement or declaration relating to taxable income that is false, where the person knows it to be false or does not believe it to be true. The section also extends to abetting the offence of wilful attempt to evade tax, penalty or interest under section 276C(1).
Abetment means intentionally encouraging, assisting or inducing the prohibited conduct. Inducement means influencing another person to undertake that conduct. A mere mistake or difference of tax interpretation does not, by itself, establish the statutory knowledge or lack of belief required for the false-statement limb.
2. Essential ingredients of the offence
- There must be abetment or inducement of another person.
- The conduct must relate to a false account, statement or declaration concerning taxable income, or to a wilful tax-evasion offence under section 276C(1).
- For a false account, statement or declaration, the person accused of abetment must know that it is false or not believe it to be true.
- The applicable punishment depends on the amount of tax, penalty or interest that would have been evaded or was wilfully attempted to be evaded.
3. Punishment under Section 278 after the Finance Act, 2026
| Amount sought to be evaded | Punishment |
|---|---|
| More than Rs. 50 lakh | Simple imprisonment up to 2 years, or fine, or both |
| More than Rs. 10 lakh but not more than Rs. 50 lakh | Simple imprisonment up to 6 months, or fine, or both |
| Rs. 10 lakh or less | Fine |
The threshold is determined by the tax, penalty or interest that would have been evaded if the false declaration, account or statement were accepted as true, or that was wilfully attempted to be evaded. The statutory provision does not prescribe a fixed fine amount.
4. Section 484 of the Income-tax Act, 2025
Section 484 of the Income-tax Act, 2025 is the corresponding provision for abetment of a false return or related tax-evasion conduct. It covers knowingly inducing another person to deliver a false account, statement or declaration, or to commit an offence under section 478(1), which addresses wilful attempts to evade tax and related liabilities.
As amended by section 118 of the Finance Act, 2026, section 484 adopts the same three punishment categories set out above: over Rs. 50 lakh, over Rs. 10 lakh up to Rs. 50 lakh, and other cases.
5. Related provisions and prosecution procedure
- Section 276C(1) (1961 Act): Wilful attempt to evade tax, penalty or interest; corresponding provision is section 478(1) of the 2025 Act.
- Section 277: False statement in verification or delivery of a false account or statement; distinct from abetting another person under section 278.
- Section 277A: Wilful falsification of books of account or documents to enable another person to evade tax or related liabilities.
- Section 278A: Enhanced punishment provisions for specified repeat offences, subject to applicable amendments.
- Section 279: Statutory framework for institution and compounding of prosecution under the 1961 Act. Applicable authorisation and procedural requirements must be considered.
6. Practical examples
Example 1: A person knowingly instructs another taxpayer to submit fictitious expenses in an income-tax statement. If the statutory conditions are established, this may amount to abetment under section 278.
Example 2: A tax professional acts on records supplied by a client without knowledge of their falsity. The mere existence of an inaccurate return does not automatically prove that the professional knowingly abetted a false statement; the facts and evidence are decisive.
7. Frequently asked questions
Does Section 278 apply only to the taxpayer?
No. It targets a person who abets or induces another person to undertake the conduct described in the section, subject to proof of its statutory ingredients.
Is imprisonment mandatory for every offence?
No. Under the amended 2026 framework, the court may impose imprisonment, fine, or both in the higher-value categories. In the lowest category, the punishment is fine.
What is the difference between Sections 277 and 278?
Section 277 concerns making a false verification or delivering a false account or statement. Section 278 concerns abetting or inducing another person to make such a false submission or to commit the specified wilful-evasion offence.
Do the 1961 and 2025 Acts apply to the same tax periods?
Not necessarily. The relevant tax year, date of conduct, commencement provisions and statutory savings or transition rules must be examined before identifying the governing Act and punishment.
8. Official statutory sources
- Finance Act, 2026 (official Gazette PDF) - amendment to section 278 of the 1961 Act.
- Finance Act, 2026, section 118 - amendment to section 484 of the 2025 Act.
- Income-tax Act, 2025 as amended by Finance Act, 2026 - section 484 and related provisions.
- Section 278, Income-tax Act, 1961 (official historical text) - consult the Finance Act, 2026 for subsequent amendments.
- CBDT guidelines for compounding of offences (2024) - subject to subsequent changes and applicable law.
Legal note: This article is general statutory information, not an assessment of any individual prosecution. Verify the law applicable to the alleged offence date and tax year, including transitional and savings provisions.