Section 271FAA — Furnishing Inaccurate Statement of Financial Transaction or Reportable Account
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and recently widened. Penalty (Rs. 50,000) where a reporting person who furnishes an SFT/reportable account provides inaccurate information in defined circumstances — inaccuracy known or that ought to have been known, failure to inform of an identified inaccuracy, or failure of due diligence/record-keeping. Sub-section (2), inserted with effect from 1-10-2024, extends a penalty to prescribed reporting financial institutions for failures relating to the financial-account reporting (CRS/FATCA) regime.
Finance Act, 2026: No amendment by the Finance Act, 2026. (Sub-section (2) was inserted/widened by the Finance (No. 2) Act, 2024 with effect from 1-10-2024, as reflected in the verbatim text.)
Mechanism: A reporting person furnishes an inaccurate SFT/reportable account, in the circumstances specified (knowledge/constructive knowledge of inaccuracy, failure to correct, or due-diligence/record failures) → penalty of Rs. 50,000; and, under sub-section (2), defined failures by prescribed reporting financial institutions → prescribed penalty.
Litigation profile: Minimal direct litigation; the candour rule applies. The provision interlocks with the CRS/FATCA due-diligence and reporting rules (Rules 114F-114H).
A. COMMENTARY
Accuracy and due diligence, not merely filing
While section 271FA penalises non-filing of the SFT, section 271FAA targets inaccuracy. It bites where the reporting person furnishes inaccurate information and either knew or ought to have known of the inaccuracy, or failed to inform the authority of an inaccuracy discovered, or failed to comply with the prescribed due-diligence requirements. The Rs. 50,000 levy enforces data quality in the third-party reporting and the international exchange-of-information frameworks.
The 2024 extension to reporting financial institutions
Sub-section (2), effective 1 October 2024, extends a dedicated penalty to prescribed reporting financial institutions for failures connected with the reporting of financial accounts under the CRS/FATCA regime (the section 285BA(1)(k) reportable accounts and Rules 114F-114H). It reflects India’s automatic-exchange-of-information commitments.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for furnishing inaccurate statement of financial transaction or reportable account.
271FAA. (1) If a person referred to in sub-section (1) of section 285BA, who is required to furnish a
statement under that section,—
(a) provides inaccurate information in the statement or fails to furnish correct information within the
period specified under sub-section (6) of the said section; or
(b) fails to comply with the due diligence requirement prescribed under sub-section (7) of the said
section,
then, the prescribed income-tax authority referred to in sub-section (1) thereof may direct that such person
shall pay, by way of penalty, a sum of fifty thousand rupees.
(2)Where in the case of a person, referred to in clause (k) of sub-section (1) of section 285BA, who is
required to furnish a statement under that section (herein referred to as the reporting financial institution)
provides inaccurate information in the statement and the inaccuracy in such statement is due to false or
inaccurate information furnished by the holder or holders of the relevant reportable account or accounts, the
prescribed income-tax authority under sub-section (1) of section 285BA, shall direct that the reporting
financial institution shall, in addition to the penalty under sub-section (1), if any, pay a sum of five thousand
rupees for every inaccurate reportable account and the reporting financial institution shall be entitled to
recover the sum so paid on behalf of such reportable account holder, or to retain out of any moneys that
may be in its possession, or may come to it from every such reportable account holder, an amount equal to
the sum so paid.
w.e.f. 1-4-2023.
C. AUTHORITIES
No direct merits authority of note has developed; the candour rule applies. The provision is governed by the section 285BA scheme and the due-diligence rules.
1. Accuracy / due-diligence default
Principle — knowledge or constructive knowledge of inaccuracy
Proposition The penalty requires inaccuracy coupled with knowledge or constructive knowledge, or a failure to correct a discovered inaccuracy, or a due-diligence/record failure; a bona fide, promptly-corrected error with proper due diligence does not attract it.
Use The defence for reporting persons who maintained due diligence and corrected errors.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.
CHAPTER XXI — PENALTIES IMPOSABLE
Section 271FAA — Furnishing Inaccurate Statement of Financial Transaction or Reportable Account
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live and recently widened. Penalty (Rs. 50,000) where a reporting person who furnishes an SFT/reportable account provides inaccurate information in defined circumstances — inaccuracy known or that ought to have been known, failure to inform of an identified inaccuracy, or failure of due diligence/record-keeping. Sub-section (2), inserted with effect from 1-10-2024, extends a penalty to prescribed reporting financial institutions for failures relating to the financial-account reporting (CRS/FATCA) regime.
Finance Act, 2026: No amendment by the Finance Act, 2026. (Sub-section (2) was inserted/widened by the Finance (No. 2) Act, 2024 with effect from 1-10-2024, as reflected in the verbatim text.)
Mechanism: A reporting person furnishes an inaccurate SFT/reportable account, in the circumstances specified (knowledge/constructive knowledge of inaccuracy, failure to correct, or due-diligence/record failures) → penalty of Rs. 50,000; and, under sub-section (2), defined failures by prescribed reporting financial institutions → prescribed penalty.
Litigation profile: Minimal direct litigation; the candour rule applies. The provision interlocks with the CRS/FATCA due-diligence and reporting rules (Rules 114F-114H).
A. COMMENTARY
Accuracy and due diligence, not merely filing
While section 271FA penalises non-filing of the SFT, section 271FAA targets inaccuracy. It bites where the reporting person furnishes inaccurate information and either knew or ought to have known of the inaccuracy, or failed to inform the authority of an inaccuracy discovered, or failed to comply with the prescribed due-diligence requirements. The Rs. 50,000 levy enforces data quality in the third-party reporting and the international exchange-of-information frameworks.
The 2024 extension to reporting financial institutions
Sub-section (2), effective 1 October 2024, extends a dedicated penalty to prescribed reporting financial institutions for failures connected with the reporting of financial accounts under the CRS/FATCA regime (the section 285BA(1)(k) reportable accounts and Rules 114F-114H). It reflects India’s automatic-exchange-of-information commitments.
B. STATUTORY TEXT (verbatim)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025; Finance Act, 2026 changes are noted above.
Penalty for furnishing inaccurate statement of financial transaction or reportable account.
271FAA. (1) If a person referred to in sub-section (1) of section 285BA, who is required to furnish a
statement under that section,—
(a) provides inaccurate information in the statement or fails to furnish correct information within the
period specified under sub-section (6) of the said section; or
(b) fails to comply with the due diligence requirement prescribed under sub-section (7) of the said
section,
then, the prescribed income-tax authority referred to in sub-section (1) thereof may direct that such person
shall pay, by way of penalty, a sum of fifty thousand rupees.
(2)Where in the case of a person, referred to in clause (k) of sub-section (1) of section 285BA, who is
required to furnish a statement under that section (herein referred to as the reporting financial institution)
provides inaccurate information in the statement and the inaccuracy in such statement is due to false or
inaccurate information furnished by the holder or holders of the relevant reportable account or accounts, the
prescribed income-tax authority under sub-section (1) of section 285BA, shall direct that the reporting
financial institution shall, in addition to the penalty under sub-section (1), if any, pay a sum of five thousand
rupees for every inaccurate reportable account and the reporting financial institution shall be entitled to
recover the sum so paid on behalf of such reportable account holder, or to retain out of any moneys that
may be in its possession, or may come to it from every such reportable account holder, an amount equal to
the sum so paid.
w.e.f. 1-4-2023.
C. AUTHORITIES
No direct merits authority of note has developed; the candour rule applies. The provision is governed by the section 285BA scheme and the due-diligence rules.
1. Accuracy / due-diligence default
Principle — knowledge or constructive knowledge of inaccuracy
Proposition The penalty requires inaccuracy coupled with knowledge or constructive knowledge, or a failure to correct a discovered inaccuracy, or a due-diligence/record failure; a bona fide, promptly-corrected error with proper due diligence does not attract it.
Use The defence for reporting persons who maintained due diligence and corrected errors.
Prepared for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the official Act; case-law holdings are the author’s summaries for professional use.