Introduction:
Statutory reporting for international transactions is a critical compliance requirement for Indian taxpayers engaged in cross-border dealings. With the Income Tax Bill, 2025 introducing Clause 172, there are important changes compared to the earlier Section 92E of the Income-tax Act, 1961. Let’s decode the latest updates in simple terms.
What Was Section 92E of the Income-tax Act, 1961?
Section 92E required every person entering into an international transaction or a specified domestic transaction to furnish a report from a Chartered Accountant in Form 3CEB before filing the income tax return.
Key points:
- Mandatory for companies, LLPs, and individuals with cross-border dealings.
- Applied even if there was a loss or nil income.
- Non-compliance attracted a penalty of ₹1 lakh under Section 271BA.
What Does Clause 172 of the Income Tax Bill, 2025 Say?
The Income Tax Bill, 2025 proposes Clause 172 to replace Section 92E. While the core requirement remains the same (filing a transfer pricing report), some terms and penalties have been updated.
Highlights of Clause 172:
- Reporting Obligation: Any person who has entered into an international or specified domestic transaction must furnish a prescribed report from an accountant.
- Timeline: Along with the income tax return or within the prescribed time, whichever is earlier.
- Penalty for Non-Compliance: Increased to ₹5 lakh.
Clause 172 vs Section 92E – Quick Comparison
| Aspect | Section 92E (Old) | Clause 172 (New) |
|---|---|---|
| Applicability | International and specified domestic transactions | Same, plus expanded definitions |
| Reporting Form | Form 3CEB | Prescribed form (likely similar) |
| Penalty for non-filing | ₹1 lakh | ₹5 lakh |
| Timeline | Before filing return | Along with return or earlier |
| Scope expansion | Limited | Includes business restructuring |
Why Has the Penalty Increased?
According to CBDT, stricter penalties are aimed at ensuring better compliance with Base Erosion and Profit Shifting (BEPS) guidelines under international tax frameworks. It reflects India’s growing commitment to global tax transparency standards.