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Tax notices

The penalty for under-reporting, and when immunity is open

An order adds income, and a penalty notice follows. You want the difference between leaving something out and a figure the papers do not support, and whether you can close the penalty without an appeal.

The assessment adds income you did not return, or it refuses a deduction. A penalty proposal under section 270A comes with it. Someone has said the deduction was not real. You want the rate, and whether paying the demand and skipping the appeal is available.
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Last reviewed: 28 October 20267 min readBy Vipul Sharma, Founder · Reviewed by Preetesh Maloo, CA

Confirm this with a practising CA before you act. The answer depends on the year and your documents.

The short answer

For a year still under the Income-tax Act, 1961, the department's penalty table sets section 270A at 50% of the tax on the under-reported income, and at 200% where that under-reporting is because of misreporting. Immunity from that penalty is a separate application under section 270AA. You pay the tax and interest in the demand, you do not appeal, and you apply within one month from the end of the month you receive the order. For a year under the Income-tax Act, 2025, the Form 161 note maps the penalty to section 439 and the immunity application to section 440. This page does not restate a percentage for section 439.

Penalty notice in hand?

Send the order. A practising CA will say whether section 270AA or Form 161 is open, and what the appeal gives up.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Related situations

Under-reporting and misreporting are not the same rate

The department's penalty table for AY 2026-27 describes section 270A in one row. The penalty is 50% of the tax on the under-reported income. If the under-reporting is in consequence of misreporting, the penalty is 200% of that tax. The same table says additional income in an updated return filed because of a notice under section 148 is not the base for this penalty.

A sum left out of the return is the ordinary under-reporting case. A deduction, or an entry, that the records do not support can be treated as misreporting. The order is what says which one the officer is using. This page does not decide that from a message, and it does not use a made-up example.

The percentage above is the 1961 Act figure on the department's table. The Form 161 note for the 2025 Act calls the penalty section 439. The Act text retrieved for this page did not yield a percentage for section 439, so none is stated.

Immunity and an appeal are different choices

lets you ask the Assessing Officer for immunity from the section 270A penalty, and from prosecution under sections 276C and 276CC. Two conditions are in the section. The tax and interest in the demand are paid within the time the demand gives. No appeal against that order has been filed. The application is within one month from the end of the month in which you receive the order.

The officer grants the immunity where those conditions are met and the penalty was not started under section 270A(9), the misreporting case. The order on the application comes within one month from the end of the month the application is received. If it is accepted, no appeal under section 246A and no revision under section 264 lies against that assessment.

So the choice is real. An appeal keeps the dispute open and keeps the penalty in play. An immunity application, once accepted, closes the appeal against that order. You do not do both.

Send the order and the demand, and we will say whether an immunity application is open or whether the appeal is the path that is left.

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The same choice under the 2025 Act

Form 161 is the application under section 440(2). The FAQ maps it from Form 68 and from section 270AA(2). It is optional. File it only if you have the assessment or reassessment order, you have paid the tax and interest in the demand in full, and you have not appealed and will not appeal before the period in section 440(5). The time limit in the FAQ is one month from the end of the month you receive the order. It is filed online, and it needs a . Part payment is not enough.

The FAQ describes immunity from penalty under section 439 and from prosecution under sections 478 and 479. It does not, in the answers read for this page, restate the old rule that misreporting blocks the application. If your year is under the 1961 Act, section 270A(9) still blocks it. If your year is under the 2025 Act, read section 440 before you give up the appeal. This page does not treat the old bar as automatically copied across.

What's involved

What the CA actually does

  1. 1

    We read which limb the order uses

    Under-reporting or misreporting, on the words of the order, not on a summary.

  2. 2

    We compare immunity with an appeal

    What you give up if the application is accepted, and whether section 270A(9) already closes immunity for a 1961 Act year.

  3. 3

    We prepare the application if you choose it

    Form 161 for a year under the 2025 Act, with the challan details the FAQ asks for. The appeal, if you choose that, is a different filing.

What to have ready

Documents you'll typically need

  • The assessment or reassessment order
  • The demand, and the challans if you have paid
  • The penalty notice, if it has a separate section

References on this page

  • Department penalty table, AY 2026-27: section 270A, 50% and 200%. https://www.incometaxindia.gov.in/w/penalties
  • Section 270AA, Income-tax Act 1961: pay the demand, no appeal, apply within one month from the end of the month of receipt. Immunity is not granted where the penalty was started under section 270A(9). https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2016/102120000000058833.htm
  • Form 161 FAQ: old Form 68 and section 270AA(2) map to Form 161 and section 440(2). Penalty section 439. Prosecution sections 478 and 479. https://www.incometaxindia.gov.in/documents/d/guest/form-161-faqs

Frequently asked questions

Common questions

On the department's table for section 270A, 50% of the tax on the under-reported income, and 200% where the under-reporting comes from misreporting. This page does not state a percentage for section 439 of the 2025 Act.

A missing figure is under-reporting. A deduction or an entry the records do not support can be misreporting. Under the 1961 Act, immunity is not granted where the penalty was started under section 270A(9). The order is what classifies it.

No. Section 270AA requires that no appeal has been filed. Form 161 says the same for section 440. If the immunity application is accepted, the appeal against that assessment does not remain open.

One month from the end of the month in which you receive the order. That is the 1961 section and the Form 161 FAQ. Pay the tax and the interest in the demand in full before you apply.

The department's penalty table says additional income reported in an updated return filed in pursuance of a notice under section 148 is not the base for a penalty under section 270A.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Penalty immunity for misreporting: additional income-tax in lieu of penalty

Right now: Misreporting can now be settled: pay the tax and interest plus additional income-tax of 100% of the tax on the under-reported income within the demand period, file no appeal, and apply within one month from the end of the month the order is received

Where it works differently

A Chapter XXII (prosecution) proceeding has already been initiated
No immunity or waiver is available, whatever is paid.
s.270AA(3A) of the 1961 Act and s.440(4) of the 2025 Act.
Penalty for misreporting was already levied before the NRI applied
An application for waiver of a penalty already levied can be made once the additional income-tax is paid; the Bombay High Court held the waiver must be granted once the conditions are met and the appeal period has expired. Check the ruling's jurisdictional application and the facts of the case.
Farah Khurshed Titina v. ITO, Bombay High Court, WP 4002 of 2026, 5 October 2026, reported by LiveLaw Biz.
The penalty is for unexplained income (ss.68 to 69D) of FY 2025-26 or earlier under the 1961 Act
The 100% route under s.270AA does not reach it. That income is penalised under s.271AAC (10% of the s.115BBE tax), and s.271AAC(2) bars any s.270A penalty on it. Only the s.440 route of the 2025 Act (120%) covers unexplained income, from tax year 2026-27.
Taxation Laws (Second Amendment) Act 2016 s.3 (s.271AAC(2)); Finance Act 2026 s.99.
Filing the application on the e-filing portal in a misreporting case
Use the prescribed application and filing route for the applicable Act and year. If a portal problem prevents filing, promptly seek official technical assistance, preserve dated screenshots, error messages and support acknowledgements, and obtain case-specific professional advice before the statutory deadline. Do not assume an alternative submission to the Assessing Officer is valid filing or that a technical problem extends the deadline.
The statutory conditions and filing deadline remain applicable. A third-party report or reader comment about a portal workaround does not establish a legally valid alternative filing route.
Under the 2025 Act (tax year 2026-27 onwards)
s.440 gives waiver of a penalty already levied, not pre-levy immunity; the application follows the penalty order.
s.440(1)(b) and (c) apply 'where penalty has been levied'; new marginal heading 'Waiver of penalty and immunity from prosecution'.

Commonly got wrong

  • Immunity is never available once the department alleges misreporting. That was the position until 28 February 2026. The Finance Act 2026 extended immunity to misreporting cases from 1 March 2026, for any assessment year.Even in a misreporting case you can now seek immunity by paying the tax, interest and additional income-tax of 100% of the tax on the under-reported income, and not appealing.
  • Immunity in a misreporting case costs the full 200% penalty. The statute fixes additional income-tax of 100% of the tax (120% for unexplained income under the 2025 Act) in lieu of the 200% penalty.Settling costs additional income-tax of 100% of the tax on the misreported income, half the 200% penalty, and you give up the appeal.

Penalty for under-reporting vs misreporting

Right now: 50% of tax on under-reported income; 200% where it is misreporting

Where it works differently

The omission was inadvertent
50% under-reporting. Misreporting needs one of six specified limbs, such as false entries or suppression of receipts.
s.270A(9) lists them exhaustively.
Tax and interest are paid and no appeal filed
Immunity from penalty and prosecution can be sought under s.270AA (s.440 of the 2025 Act), applied for within one month from the end of the month the order is received. From 1 March 2026 this also covers misreporting, on paying additional income-tax of 100% of the tax on the under-reported income.
The one-month window is easy to miss from abroad. Finance Act 2026 s.21 (s.270AA) and s.99 (s.440).
The income falls in tax year 2026-27 or later
The penalty is under s.439 of the Income-tax Act 2025. Its misreporting limbs are s.439(11)(a) to (g); clause (g), unexplained income, was added by the Finance Act 2026 when the separate s.443 penalty was omitted.
Finance Act 2026 ss.98 and 100.

Commonly got wrong

  • Leaving out income means a 200% penalty. 200% is for misreporting, which needs a specified limb. Ordinary under-reporting is 50%.50% of the tax on under-reported income. 200% only where the department establishes misreporting.

Related

If this matched your situation, these go further

You have a tax notice and you do not know the sectionYour return came back with a demand or a smaller refund (Section 143(1))Reopening an old year: responding to a Section 148 reassessment noticeA tax demand after your NRI assessment, and how to stay itNRI ITR filing (we file for you)

Penalty notice in hand?

Send the order. A practising CA will say whether section 270AA or Form 161 is open, and what the appeal gives up.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Penalty notice in hand?

Send the order. A practising CA will say whether section 270AA or Form 161 is open, and what the appeal gives up.

Request a free CA callChat on WhatsApp

No card, no obligation. All certification and filing work is handled by ICAI-registered practising Chartered Accountants.