ss.41 to 47, BMA 2015 — Penalties under the Black Money Act

Currently operative

Sections 42 and 43 carry a twenty lakh rupee threshold substituted by the Finance (No. 2) Act 2024 with effect from 1 October 2024, which excludes immovable property. Section 41 has no threshold.

Income-tax Act, 1961

ss.41 to 47, BMA 2015

Income-tax Act, 2025

Unaffected; penalty chapter of the 2015 Act

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

Chapter IV of the Black Money Act contains five penalties that operate independently. Section 41 allows a penalty of three times the tax computed under section 10, which on a thirty per cent charge is ninety per cent of the value of the asset, taking total exposure with tax to one hundred and twenty per cent. Section 42 imposes a flat ten lakh rupees where a resident who held a foreign asset or had foreign income failed to furnish the return at all. Section 43 imposes the same ten lakh rupees where the return was furnished but the foreign asset was not reported or was reported inaccurately, which is the Schedule FA default and the most commonly encountered exposure. Section 44 imposes a penalty equal to the tax arrear on an assessee in default, and section 45 imposes between fifty thousand and two lakh rupees for other defaults, such as failing without reasonable cause to answer a question or to comply with a summons under section 8. Sections 42 and 43 do not apply where the aggregate value of the asset or assets, other than immovable property, does not exceed twenty lakh rupees. Section 46 governs procedure and section 47 bars a penalty order after one year from the end of the financial year in which the section 46 notice was issued.

What the provision does

Imposes the penalties for undisclosed foreign income and assets, for failure to furnish the return, for failure to report a foreign asset in the return, and for default in payment.

Threshold questions

Is the penalty one under section 41, which depends on the assessment, or under section 42 or 43, which does not
Does the aggregate value of the assets, excluding immovable property, exceed twenty lakh rupees
Was the section 41 penalty initiated during the pendency of proceedings for the relevant year, as section 46(2) requires
Was the order passed within one year from the end of the financial year of the section 46 notice
Where required, was approval of the Joint Commissioner or Joint Director obtained

The recurring disputes.

Whether the penalty falls with the assessment

A section 41 penalty presupposes that tax has been computed under section 10 and falls when the assessment falls. Penalties under sections 42 and 43 are triggered by a default in relation to the Income-tax Act return and survive independently. The Chennai Bench demonstrated both halves in a single order in Elangovan Malarmangai, deleting the section 41 penalty and confirming the section 42 and 43 penalties for the same period.

The immovable property exclusion

The twenty lakh rupee threshold does not extend to foreign immovable property, so a flat or plot of any value attracts the full ten lakh rupee penalty. Since overseas immovable property is among the most commonly under-reported items in Schedule FA, the exclusion does a great deal of work and is frequently overlooked.

Reporting default treated as an undisclosed asset

A fully explained foreign asset left out of Schedule FA attracts ten lakh rupees under section 43. It is not an undisclosed asset within section 2(11) unless the source of investment is unexplained, and treating it as one converts a ten lakh rupee penalty into a demand of one hundred and twenty per cent of value.

Frequently asked.

What is the penalty for not reporting a foreign asset in Schedule FA?

Ten lakh rupees under section 43 of the Black Money Act, for each year of default, where the return was furnished but information about a foreign asset was omitted or inaccurate. No undisclosed income and no assessment under the Act is required; the default is the reporting failure itself. Since 1 October 2024 the section does not apply where the aggregate value of the asset or assets, other than immovable property, does not exceed twenty lakh rupees. Foreign immovable property is outside that relief entirely.

Does a Black Money Act penalty survive if the assessment is quashed?

It depends on the penalty. A section 41 penalty is available only where tax has been computed under section 10, so it falls with the assessment, and section 47(2), which allows a penalty to be revised or revived in line with the appellate outcome, confirms that linkage. Penalties under sections 42 and 43 are triggered by a default in relation to the Income-tax Act return, not by any assessment under this Act, and survive it. Where the defect is want of jurisdiction over the person under section 2(2), everything falls together, because a person who is not an assessee cannot be penalised under the Act either.