Sections 271FAB and 271FB of Income Tax Act 1961
Section 271FAB prescribes a penalty for an eligible investment fund that fails to furnish the statement, information or document required under section 9A(5). Section 271FB concerns failure by an employer to furnish a return of fringe benefits under section 115WD and is principally relevant to the historical fringe benefit tax regime.
Section 271FAB - Eligible Investment Fund Reporting Default
If an eligible investment fund required to furnish a statement or any information or document under section 9A(5) fails to furnish it within the time prescribed under that provision, the prescribed income-tax authority may direct the fund to pay a penalty of Rs. 5,00,000.
What is Section 9A?
Section 9A contains a safe-harbour framework for specified fund management activity. Subject to the statutory conditions, fund management activity carried out through an eligible fund manager acting on behalf of an eligible investment fund does not constitute a business connection in India merely because of that activity. The section also provides that an eligible investment fund is not treated as resident in India merely because its eligible fund manager undertaking fund management activities is situated in India.
An eligible investment fund is broadly a fund established, incorporated or registered outside India that collects funds from members for investment for their benefit and satisfies the conditions laid down in section 9A. The exact conditions must be tested against the law applicable to the relevant financial year.
Reporting Requirement under Section 9A(5)
Every eligible investment fund covered by section 9A must, for its activities in a financial year, furnish within 90 days from the end of that financial year a statement in the prescribed form to the prescribed income-tax authority. The statement contains information relating to fulfilment of the statutory conditions, together with other relevant information or documents as prescribed.
| Relevant provision | Section 9A(5) |
|---|---|
| Person responsible | Eligible investment fund |
| General time limit | Within 90 days from the end of the financial year |
| Penalty provision | Section 271FAB |
| Penalty amount | Rs. 5,00,000 |
| Authority | Income-tax authority prescribed under section 9A(5) |
Reasonable Cause under Section 273B
Section 271FAB is included in section 273B. Therefore, no penalty is imposable for the failure referred to in section 271FAB if the person proves that there was reasonable cause for that failure. Whether reasonable cause exists depends on the evidence and circumstances of the particular case.
Section 271FB - Failure to Furnish Return of Fringe Benefits
Section 271FB provides that if an employer required to furnish a return of fringe benefits under section 115WD(1) fails to furnish the return within the prescribed time, the Assessing Officer may direct the employer to pay a penalty of Rs. 100 for every day during which the failure continues.
| Relevant return | Return of fringe benefits under section 115WD(1) |
|---|---|
| Default | Failure to furnish the return within the prescribed time |
| Penalty | Rs. 100 for every day during which the failure continues |
| Authority | Assessing Officer |
Historical Nature of Fringe Benefit Tax
Section 271FB belongs to the statutory framework introduced for fringe benefit tax. Fringe benefit tax was abolished with effect from assessment year 2010-11. Accordingly, section 271FB is generally of historical relevance for periods when an employer was required to furnish a return of fringe benefits under section 115WD.
Section 271FB is also listed in section 273B, so the reasonable-cause protection applies to a failure covered by that penalty provision.
Income-tax Act, 2025 Corresponding Provision
The Income-tax Act, 2025 contains section 456 for penalty for failure by an eligible investment fund to furnish the statement, information or document required under paragraph 4 of Schedule I. The stated penalty is Rs. 5,00,000. For proceedings relating to earlier periods, the governing provisions and commencement rules must be checked before applying the newer enactment.
Official Resources
Income Tax Department - Section 271FAB
Income Tax Department - Section 9A
Income Tax Department - Section 271FB
Income Tax Department - Section 273B