Income Tax Act 1961 Section 285B

Income Tax Act Section 285B requires certain entities to file annual information returns with the tax authorities. This provision helps the government track financial transactions and ensures transparency in tax matters. It mainly concerns compliance and reporting obligations for specified persons, including companies and other entities.

Understanding Section 285B is crucial for taxpayers, tax professionals, and businesses to avoid penalties and ensure timely submission of required information. This section plays a vital role in the administration of indirect tax compliance and assists in curbing tax evasion.

Income Tax Act Section 285B – Exact Provision

Section 285B mandates that specified persons, including companies, must submit annual information returns to the Income Tax Department. The returns contain details of financial transactions and other prescribed information. This helps the tax authorities monitor compliance and detect discrepancies.

• Applies to companies and other prescribed persons.

• Requires filing of annual information returns.

• Prescribed forms and timelines must be followed.

• Ensures transparency and compliance.

• Non-compliance attracts penalties.

Explanation of Income Tax Act Section 285B

This section requires specified entities to submit annual information returns to the tax authorities.

• Mandates filing by companies and other prescribed persons.

• Applies to financial transactions and other relevant data.

• Triggers on completion of financial year.

• Information must be furnished in prescribed form and manner.

• Non-filing or incorrect filing leads to penalties.

Purpose and Rationale of Income Tax Act Section 285B

Section 285B aims to enhance tax transparency and compliance by mandating annual reporting of financial information.

• Ensures accurate tracking of financial transactions.

• Prevents tax evasion and leakage.

• Supports effective tax administration.

• Encourages voluntary compliance.

When Income Tax Act Section 285B Applies

This section applies annually to specified persons after the close of the financial year.

• Relevant for each financial year and corresponding assessment year.

• Applies to companies and other prescribed entities.

• Includes transactions as defined by rules.

• Exceptions may apply as per prescribed conditions.

Tax Treatment and Legal Effect under Income Tax Act Section 285B

Section 285B itself does not tax income but mandates reporting of specified information. The data furnished assists in tax assessment and compliance verification. Failure to comply can lead to penalties, affecting the taxpayer's legal standing.

• Does not directly impose tax liability.

• Facilitates accurate computation of taxable income.

• Interacts with assessment and penalty provisions.

Nature of Obligation or Benefit under Income Tax Act Section 285B

The section creates a compliance obligation for specified persons to furnish annual information returns. It is mandatory and failure to comply attracts penalties. The benefit lies in transparent tax administration and reduced scrutiny for compliant taxpayers.

• Creates mandatory compliance duty.

• Applies to companies and prescribed persons.

• Non-compliance results in penalties.

• Promotes transparency and trust.

Stage of Tax Process Where Section Applies

Section 285B applies at the reporting stage after the financial year ends, before or during assessment.

• Information return filing stage.

• Pre-assessment compliance check.

• Supports return filing and assessment.

• May trigger further scrutiny or audit.

Penalties, Interest, or Consequences under Income Tax Act Section 285B

Non-compliance with Section 285B attracts penalties under the Income Tax Act. The penalty amount may vary based on the delay or failure to furnish information. Persistent default may lead to prosecution or further legal action.

• Monetary penalties for late or non-filing.

• Possible prosecution for willful default.

• Adverse impact on assessment proceedings.

Example of Income Tax Act Section 285B in Practical Use

Assessee X, a company, completes its financial year on March 31. Under Section 285B, it must file an annual information return detailing specified financial transactions by the prescribed due date. Failure to do so results in penalties. Timely filing helps Assessee X avoid penalties and maintain good compliance status.

• Timely filing prevents penalties.

• Ensures smooth assessment process.

Historical Background of Income Tax Act Section 285B

Section 285B was introduced to strengthen tax compliance through mandatory information reporting. Over time, amendments have expanded its scope and prescribed forms. Judicial interpretation has reinforced the importance of accurate and timely reporting.

• Introduced to enhance transparency.

• Expanded scope through Finance Acts.

• Supported by judicial rulings emphasizing compliance.

Modern Relevance of Income Tax Act Section 285B

In 2026, Section 285B remains crucial for digital tax compliance. With AIS, TDS returns, and faceless assessments, accurate information returns are vital. It impacts companies and other entities by ensuring data availability for automated processing.

• Supports digital filing and compliance.

• Integral to faceless assessment procedures.

• Ensures policy adherence and transparency.

Related Sections

• Income Tax Act Section 4 – Charging section.

• Income Tax Act Section 5 – Scope of total income.

• Income Tax Act Section 139 – Filing of returns.

• Income Tax Act Section 143 – Assessment.

• Income Tax Act Section 234A – Interest for default in return filing.

• Income Tax Act Section 271F – Penalty for failure to furnish information return.

Case References under Income Tax Act Section 285B

No landmark case directly interprets this section as of 2026.

Key Facts Summary for Income Tax Act Section 285B

• Section: 285B

• Title: Annual Information Returns

• Category: Compliance, Reporting

• Applies To: Companies and prescribed persons

• Tax Impact: Facilitates tax assessment, no direct tax

• Compliance Requirement: Mandatory annual filing

• Related Forms/Returns: Prescribed forms under rules

Conclusion on Income Tax Act Section 285B

Section 285B plays a vital role in the Indian tax system by mandating annual information returns from specified entities. This ensures transparency and helps the tax authorities monitor financial transactions effectively.

Compliance with this section reduces the risk of penalties and supports smooth tax assessments. Taxpayers and professionals must stay updated on prescribed forms and deadlines to maintain good standing with tax authorities.

FAQs on Income Tax Act Section 285B

Who is required to file annual information returns under Section 285B?

Companies and other prescribed persons as defined by the Income Tax rules must file annual information returns under Section 285B. The exact entities are specified in the rules framed under the Act.

What is the deadline for filing the information return under Section 285B?

The deadline is prescribed by the Income Tax Department and usually falls after the end of the financial year. Taxpayers must follow the notified due dates to avoid penalties.

What happens if the information return is not filed on time?

Failure to file the annual information return on time attracts monetary penalties. Continued non-compliance may lead to prosecution or further legal consequences.

Does Section 285B impose any direct tax liability?

No, Section 285B does not impose direct tax liability. It mandates reporting of information to assist in tax administration and compliance verification.

Can the information filed under Section 285B be corrected if there is an error?

Yes, taxpayers can correct errors by filing revised information returns within the prescribed time or as allowed by the tax authorities.