Under the Board's guidelines of 17 October 2024 the charge for a s.276CC offence is 15% of the tax sought to be evaded, or of the tax on the under-reported income, subject to a minimum of five lakh rupees; where the failure to file follows a search or survey it is 30%, subject to a minimum of ten lakh rupees. The minimum is the number that decides most files, because on a year where the tax was already collected at source the percentage produces almost nothing and the minimum produces five lakh rupees anyway. Where the same issue and year attract both s.276C(1) and s.276CC, only the s.276C(1) charge is payable.
**Where the number comes from.** The power is s.279(2); the rate is in the Annexure to the Board's Guidelines for Compounding of Offences under the Income-tax Act, 1961 dated 17 October 2024, which supersede the earlier sets. They state only that they "shall come into effect from the date of issuance", and nothing read here says whether they govern applications that were already pending when they issued. The entry against s.276CC reads: '30% of the amount of tax sought to be evaded or the amount of tax on under-reported income, as the case may be, in case of default in filing of return pursuant to search or survey action, subject to a minimum of Rs. 10,00,000/- (Rupees ten lakh). 15% of the amount of tax sought to be evaded or the amount of tax on under-reported income, as the case may be, subject to a minimum of Rs. 5,00,000/-(Rupees five lakh), in other cases. It is clarified that in case compounding proceedings relate to Sections 276C(1) and 276CC for the offence involving same issue and year, the compounding charges as per 276C(1) only shall be applicable.' The entry for s.276CCC — the failure to file in a block-assessment search case — is expressed as the same as the s.276CC charge for a default following a search.
**Why the minimum, not the rate, is the number to quote the client.** The base is the tax sought to be evaded or the tax on the under-reported income. On the ordinary s.276CC file — the return went in late, the income was fully disclosed when it went in, and the tax had already been collected at source and by advance tax — there is little or no tax sought to be evaded and no under-reported income, so 15% of it is a small figure or nothing at all. The minimum then takes over, and the charge is five lakh rupees. That is a charge per offence, and a two-year show cause notice is two offences.
The Board's FAQs on these guidelines, Circular No. 4/2025 dated 17 March 2025, confirm that the minimum does the work in exactly the situation where the base cannot be worked out. Question 33 deals with cases where the tax sought to be evaded or the tax on under-reported income cannot be determined because the assessment has not been completed, and answers that in such cases the compounding charge shall be the minimum compounding charge applicable to a s.276CC offence under Annexure 4 of the guidelines. The wording in the copy read carries scanning artefacts, so treat the sense as reliable and the characters as not.
**The comparison this forces.** Set the charge against what the proviso does for free. If the tax on the total income determined on regular assessment, after the credits, is under the proviso figure, the person 'shall not be proceeded against' at all — there is nothing to compound, and paying five lakh rupees a year to compound a charge that the proviso already answers is a bad trade. Compounding earns its place where the proviso does not apply: where the years are charged on the s.142(1)(i) or s.148 limb, where the tax after credits is over the figure, or where the client will not risk a criminal record on an arguable point.
**Timing is no longer a constraint.** The FAQs state that an application 'can be filed at any time after committing the offence, regardless of whether the same has come to the notice of the department or prosecution proceedings have been launched', and separately that a 'compounding application may be filed suo-moto at any time, after the offence(s) is committed, irrespective of whether it comes to the notice of department or not.' The 36-month limit that ran from the filing of the complaint under the earlier guidelines is gone. So the application does not have to be rushed to beat a clock, and the option does not expire while the reply to the show cause notice is being prepared.
**What has to be paid first, and who decides.** Everything else due on the offence — tax, interest including interest under s.220, penalty and any other sum — must be paid before the charge, and the competent authority is the jurisdictional Principal Chief Commissioner, Chief Commissioner, Principal Director General or Director General. Compounding is not a matter of right: the guidelines allow rejection in exceptional cases, on written reasons, such as a habitual offender or the gravity of the offence. The library covers those general terms at the entry on the guidelines and at the note on compounding a s.276B prosecution; what is different here is only the charge, and the difference is large — 15% or 30% of a base with a hard minimum, against 1.5% a month of the tax in default for a deduction-at-source offence.
A client asked to choose between compounding and defending needs one number. For a deduction-at-source offence that number is a percentage of a known default and it is capped. For a failure to file it is a floor: five lakh rupees a year, ten if the year follows a search, however small the tax at stake. That reverses the usual advice — on a fully-paid year the cheap route is the proviso and the expensive route is compounding.
My penalty proceedings were dropped and a refund was ordered, but the section 276CC prosecution is still running. Is there Supreme Court authority to have it quashed?
The firm never filed its returns and the assessments were made under s.144. Can we get the s.276CC complaint discharged because the assessment was still being fought?
I filed my return late. When is the 276CC offence committed, and is it still a first offence?
After a search I filed revised returns giving up a capital gains claim and paid the tax. Can I still be prosecuted under s.276C(1) for wilful evasion?
The section 276CC complaint against me was filed by an Assistant Commissioner although my case was with the Income-tax Officer, and no assessment was ever made on the capital gain the complaint alleges. Can that prosecution stand?
The Commissioner has refused to compound my s.276CC offence. Can I take that refusal to the High Court?
I never filed my return for the year and the department has launched a prosecution, but my TDS and advance tax more than covered the tax and I am actually due a refund. Can the criminal case go on?
The department says the section 278E presumption means I must face the whole trial. Has any court actually held the presumption rebutted, and on what material?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.