Fees Under Section 428 of the Income-tax Act, 2025

What Is the Fee Under Section 428?

Section 428 of the Income-tax Act, 2025 is the provision that charges a flat, no-discretion fee — not a discretionary penalty — when a taxpayer misses any of four specific compliance deadlines: filing the return of income, filing a revised return, getting accounts tax-audited, and filing the transfer pricing accountant's report. As substituted by the Finance Act, 2026 with effect from 1 April 2026, the section fixes exact rupee amounts for each default, replacing what were separate, discretionary penalty provisions under the Income-tax Act, 1961.

For a foreign company or investor with an Indian subsidiary, branch, or liaison office, section 428 is the section that turns a missed filing deadline into an automatic, quantified cost — one the Assessing Officer does not exercise judgment to impose or waive.

Legal Basis

Section 428 of the Income-tax Act, 2025

Section 428, headed "Fee for default in furnishing return of income, audited accounts and reports," sits in Part F ("Levy of fee in certain cases") of Chapter XIX of the Income-tax Act, 2025. Its current, four-limb text was substituted by the Finance Act, 2026, with effect from 1 April 2026. The section as originally enacted covered only late filing of the return itself; the Finance Act, 2026 added the tax audit and transfer pricing report defaults and restructured the return-filing fee into separate original-return and revised-return limbs.

The Income-tax Act, 2025 repealed the 1961 Act but keeps it in force for tax years beginning before 1 April 2026. Section 428 in its current form therefore applies from tax year 2026-27 (assessment year 2027-28) onward; for earlier tax years, the corresponding 1961 Act provisions — section 234F (late return), section 271B (tax audit default), and section 271BA (transfer pricing report default) — continue to govern.

The Four Defaults Section 428 Covers

All four fees are charged "without prejudice to the provisions of this Act" — the fee is additional to, not a substitute for, any tax, interest, or other consequence the same default may trigger elsewhere in the Act.

1. Late or Non-Filing of the Return of Income — Section 428(a)

A person required to file a return of income under section 263 who misses the due date fixed by section 263(1) must pay a fee of INR 1,000 if total income does not exceed INR 5,00,000, or INR 5,000 in any other case. Section 263(1) itself fixes four due dates depending on the taxpayer: 30 November where a transfer pricing accountant's report under section 172 applies, 31 October for companies, audited persons, and partners of audited firms, 31 August for other business or professional assessees whose accounts are not required to be audited, and 31 July for everyone else. Section 428(a) succeeds section 234F of the 1961 Act, which performed the same late-return fee function under the old law.

2. Late Revised Return — Section 428(b)

Section 263(5) lets a taxpayer who discovers an omission or wrong statement in a filed return correct it by furnishing a revised return, at any time within twelve months from the end of the relevant tax year or before assessment is completed, whichever is earlier. Section 428(b) attaches the same fee — INR 1,000 or INR 5,000, on the same total-income test as 428(a) — where that revised return is furnished more than nine months after the end of the relevant tax year.

3. Tax Audit Default — Section 428(c)

A person who fails to get their accounts audited, or fails to furnish the report of that audit, as required under section 63 must pay a fee of INR 75,000 for a delay of up to one month, rising to INR 1,50,000 thereafter. This is the successor to the penalty previously levied under section 271B of the 1961 Act, and it converts what was a discretionary, Assessing-Officer-imposed penalty into a fixed, time-banded fee.

4. Transfer Pricing Report (Form 48 (formerly Form 3CEB)) Default — Section 428(d)

A person who fails to furnish the accountant's report required under section 172 — filed in Form 48, certifying that international and specified domestic transactions meet the arm's-length standard — must pay a fee of INR 50,000 for a delay of up to one month, rising to INR 1,00,000 thereafter. This succeeds the penalty previously levied under section 271BA of the 1961 Act.

Fees, Not Penalties — Why the Wording Matters

The Income-tax Act, 2025 deliberately labels all four section 428 charges as "fees," not "penalties," and places them in the Act's fee Part rather than in its penalty chapter, Chapter XXI. The distinction has real consequences, not just a different label:

• No reasonable-cause defense. Section 470 of the Income-tax Act, 2025 gives taxpayers a statutory reasonable-cause defense, but only against penalty under a specific list of penalty-chapter sections it names individually. Section 428 does not appear on that list — it is a fee under a different chapter, not a penalty. A fee under section 428 is charged once the default and the elapsed time are established, with no built-in exception for a bona fide reason for the delay.
• Fixed quantum. Each fee is a flat rupee amount, or an amount stepped by a single time band (up to one month / thereafter), rather than a percentage of turnover, tax, or transaction value that would need to be computed and could be contested case by case.
• A standalone charge. The fee neither triggers nor substitutes for the Act's separate penalty and prosecution provisions for under-reporting, concealment, or false certification, which continue to apply on their own facts.

Why This Matters for Foreign Companies and Investors

For a foreign-owned Indian subsidiary, branch, or liaison office, all four section 428 defaults are live risks in a typical annual filing cycle:

• Every company with a foreign shareholder must file its return of income every year — missing the 31 October (or 30 November, where transfer pricing applies) due date triggers section 428(a) automatically, with no notice required before the fee attaches.
• A company whose turnover or gross receipts cross the section 63 threshold must have its accounts tax-audited and furnish the audit report. A missed or late report triggers section 428(c), a fee that reaches INR 1,50,000 once the delay runs past one month.
• A company with cross-border dealings with its foreign parent or group affiliates — management fees, royalties, intercompany loans, cost allocations — must file Form 48 under section 172. Missing it triggers section 428(d), on top of the separate documentation exposure under transfer pricing rules.

Because the fee is charged without a reasonable-cause hearing, the practical safeguard is calendar discipline rather than an after-the-fact explanation. Missing a deadline by even a few days inside the "up to one month" band still triggers the lower fee; crossing the one-month mark moves straight to the higher one.

Practical Example

A US-based technology company's wholly owned Indian subsidiary has INR 18 crore in turnover for tax year 2026-27 and pays a management fee to its US parent — an international transaction that requires both a section 63 tax audit and a section 172 (Form 48) transfer pricing report. Mid-transition to the new Act's forms and section numbers, the finance team files the tax audit report six weeks late and the Form 48 report three weeks late.

Because the tax audit report is more than one month late, the company owes a section 428(c) fee of INR 1,50,000. Because the Form 48 report is late but within one month, the company owes a section 428(d) fee of INR 50,000. Total section 428 fee exposure: INR 2,00,000 — before any interest on unpaid tax under sections 423 to 425 of the Income-tax Act, 2025 (sections 234A to 234C of the Income-tax Act, 1961), or separate transfer pricing documentation penalties, are added.

Common Mistakes

• Assuming a reasonable-cause defense applies. Unlike many penalty provisions elsewhere in the Act, section 428 fees are charged on the fact of default and delay alone; section 470's reasonable-cause savings clause does not extend to it.
• Treating the fee as a one-time flat charge. Two of the four defaults — tax audit (428(c)) and Form 48 (428(d)) — step up once the delay passes one month. Filing on day 32 rather than day 29 roughly doubles or triples the fee.
• Confusing the section 428(a)/(b) fee with interest charges. Late filing and late revision also carry interest under sections 423 to 425 of the 2025 Act on unpaid tax, in addition to, not instead of, the section 428 fee.
• Citing the old section numbers in current-tense advice. For tax year 2026-27 onward, the operative citation is section 428, not sections 234F, 271B, or 271BA — those 1961 Act numbers remain correct only for tax years before 1 April 2026.
• Assuming the return-filing fee and the audit-default fee are alternatives. A company that files its tax audit report late but its return on time still owes the section 428(c) fee independently — each of the four defaults is a separate trigger.

Frequently Asked Questions

Does section 428 replace all penalties for late tax filings in India?

No. Section 428 covers four specific defaults: late return, late revised return, tax audit default, and Form 48 default. Interest on unpaid tax under sections 423 to 425, and separate penalties for under-reporting or concealment under section 439 onward, continue to apply independently of any section 428 fee.

Is the section 428(c) tax audit fee based on turnover, like the old section 271B penalty?

No. Section 428(c) sets two flat amounts — INR 75,000 for a delay up to one month and INR 1,50,000 thereafter — rather than a percentage-of-turnover calculation left to be worked out case by case. The fee does not vary further with the size of the business once the relevant time band is reached.

When did the current, four-limb version of section 428 take effect?

The version described here was substituted by the Finance Act, 2026, with effect from 1 April 2026. It applies to tax year 2026-27 (assessment year 2027-28) and later; earlier tax years remain governed by the corresponding provisions of the Income-tax Act, 1961.

Can the tax department waive a section 428 fee for a genuine hardship?

Section 428 does not itself provide a waiver or reasonable-cause exception, and section 470 of the Income-tax Act, 2025 — the Act's general reasonable-cause savings clause — names only specific penalty-chapter sections, not section 428, among the provisions it covers. The fee is charged once the default and the elapsed time are established.

Does filing Form 48 late, while the tax audit report is on time, still trigger a fee?

Yes. Section 428(c) (tax audit) and section 428(d) (Form 48) are independent triggers under the same section. A company can owe the section 428(d) fee on its own where its transfer pricing report is late even though its tax audit report and return were both filed on time.

See also: Tax Audit, Transfer Pricing Documentation, and Income Tax Return.

Need help staying ahead of India's tax audit, transfer pricing, and return-filing deadlines? Beacon Filing's compliance outsourcing service tracks every section 428 trigger date for your Indian entity.