Section 485 of the Income-tax Act, 2025 — Punishment for Second and Subsequent Offences

In plain language

What Section 485 says in plain English

Section 485 of the Income-tax Act, 2025 is the "repeat offender" clause in the criminal (prosecution) part of the Act — Chapter XXII, "Offences and Prosecution." It does not create a new offence of its own. Instead, it enhances the punishment for a person who is convicted a second time (or more) for certain serious tax crimes already listed elsewhere in the Chapter. In simple terms: get caught and convicted once, you face the ordinary punishment for that offence; get convicted again for a listed offence, and Section 485 kicks in with a tougher, mandatory sentence.

It is the 2025 Act's successor to Section 278A of the old Income-tax Act, 1961. The idea is unchanged: the law treats a habitual tax offender more harshly than a first-timer.

Which offences trigger Section 485

The enhanced punishment applies only where the second/subsequent conviction is under one of these listed sections of the 2025 Act:

• Section 476 — failure to pay tax deducted (TDS) to the credit of the Central Government.
• Section 477 — failure to pay tax collected at source (TCS).
• Section 478(1) — wilful attempt to evade tax, penalty or interest.
• Section 479 — wilful failure to furnish a return of income.
• Section 480 — failure to furnish a return in search cases.
• Section 482 — false statement in verification / delivering a false account or statement.
• Section 484 — abetment of a false return, account, statement or declaration.

The punishment — and the big Finance Act 2026 change

As originally enacted, Section 485 prescribed rigorous imprisonment of not less than 6 months, extendable to 7 years, plus fine, mirroring the old Section 278A. However, the Finance Act, 2026 (effective 1 April 2026) significantly softened this as part of a wider decriminalisation drive covering Sections 473–485 and 494.

With effect from 1 April 2026, the punishment for a second or subsequent offence under Section 485 is now:

• Simple imprisonment (no longer "rigorous").
• Term of not less than 6 months, extendable up to 3 years (reduced from 7 years).
• Plus a fine (the fine requirement is retained).

Who it applies to

• Any "person" — individuals, and in the case of companies/firms, the directors, partners or officers held responsible under the Act's principal-officer rules.
• Only those already convicted once of a listed offence and then convicted again. A pending case, penalty, or a mere assessment addition is not a "conviction."

How it interacts with related sections

• Section 485 overrides the ordinary sentence in the base offence section for the repeat conviction — the court must apply the enhanced minimum.
• Prosecution still requires sanction of the competent authority and proof of the culpable mental state (mens rea), which the Act presumes but the accused can rebut.
• It works alongside compounding provisions — many offences can be compounded (settled) to avoid prosecution altogether, which in practice keeps most taxpayers far away from Section 485.

Practical implications

• For an ordinary taxpayer who files honestly, Section 485 is essentially irrelevant — it targets deliberate, repeated evasion.
• The 2026 shift from rigorous 7-year to simple 3-year imprisonment reflects a policy of "rigour to reason" — punishing genuine habitual fraud while removing disproportionately harsh jail terms.
• Businesses handling TDS/TCS should note that repeated non-deposit of deducted tax is exactly the kind of conduct that can escalate under Section 485.