Section 74A Penalties: Four Windows and What Each Costs

Section 74A Penalties explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

The tax is the tax. The penalty is a function of timing — and the difference between the best and worst outcome on a ₹1 crore demand is a full crore.

Non-fraud (s.74A(8)): pay tax with interest before the notice on your own or the officer's ascertainment, with a written intimation — no notice issues and no penalty. Or pay tax with interest within sixty days of the notice — no penalty, and all proceedings deemed concluded. Fraud (s.74A(9)): pay tax, interest and 15% penalty before the notice — no notice issues. Or tax, interest and 25% within sixty days of the notice — proceedings deemed concluded. Or tax, interest and 50% within sixty days of communication of the order — proceedings deemed concluded. Otherwise the penalty is 10% or ₹10,000, whichever is higher (non-fraud) or 100% of the tax (fraud), under s.74A(5).

The two ladders

Non-fraud — s.74A(5)(i) and (8)

Fraud, wilful misstatement or suppression — s.74A(5)(ii) and (9)

What each window costs, on ₹1 crore

Assume tax of ₹1,00,00,000, and set interest aside since it runs in every case.

Non-fraud:

• before the notice — nil penalty;
• within 60 days of the notice — nil penalty;
• otherwise — ₹10,00,000.

Fraud:

• before the notice — ₹15,00,000;
• within 60 days of the notice — ₹25,00,000;
• within 60 days of the order — ₹50,00,000;
• otherwise — ₹1,00,00,000.

The step from the 60-days-of-order window to no window at all is ₹50 lakh, and it turns on a single date.

The written intimation is not optional

Both s.74A(8)(i) and s.74A(9)(i) require the person to "inform the proper officer in writing of such payment". The consequence — that the officer "shall not serve any notice" — is expressed to follow "on receipt of such information".

So a DRC-03 filed on the portal, without a written intimation identifying the ascertainment, the period and the basis, does not by itself engage the sub-section.

What the intimation should contain:

• the period and the issue;
• the ascertainment — whose, and how computed;
• the tax, interest and, in a fraud case, the 15% penalty, separately;
• the DRC-03 ARN and date;
• an express statement that the payment is made under s.74A(8)(i) or s.74A(9)(i);
• where other issues are disputed, that the payment is without prejudice to them.

DRC-03 →

Section 74A(10): the shortfall trap

"Where the proper officer is of the opinion that the amount paid under clause (i) of sub-section (8) or clause (i) of sub-section (9) falls short of the amount actually payable, he shall proceed to issue the notice as provided for in sub-section (1) in respect of such amount which falls short."

So a pre-notice payment protects only the amount paid. Where the officer considers the ascertainment short, a notice issues for the shortfall.

Two practical consequences:

Compute conservatively. A payment that covers the issue fully closes it. One that covers 60% of it invites a notice for the remaining 40% — and the penalty on the shortfall is the ordinary penalty, not the concessional one.

Document the ascertainment. Where the department later disputes the computation, the working submitted with the intimation is the evidence that the ascertainment was genuine and complete on the material then available.

Section 74A(11): the exception that removes the concession

"Notwithstanding anything contained in clause (i) or clause (ii) of sub-section (8), penalty under clause (i) of sub-section (5) shall be payable where any amount of self-assessed tax or any amount collected as tax has not been paid within a period of thirty days from the due date of payment of such tax."

This is important, and it is easily missed.

For two categories — self-assessed tax and amounts collected as tax — the nil-penalty windows in s.74A(8) do not apply where the amount has not been paid within thirty days of the due date. The 10% / ₹10,000 penalty applies regardless.

So the classic case of a liability declared in GSTR-1 but not paid in GSTR-3B, left unpaid beyond thirty days, does not get the nil-penalty benefit. And s.75(12) allows self-assessed tax to be recovered under s.79 without any notice at all. Rule 88C and DRC-01B →

Explanation 1: what "deemed concluded" covers

Explanation 1(i): the expression "all proceedings in respect of the said notice" shall not include proceedings under s.132.

So concluding the demand does not conclude the prosecution. Payment closes the tax proceeding; it does not close a criminal case. Section 132 and prosecution →

Explanation 1(ii): where a notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and the proceedings against the main person have been concluded, the proceedings against all the persons liable to penalty under s.122 and s.125 are deemed to be concluded.

That is a real benefit for directors, employees and co-noticees. Where the company concludes the demand by paying within a window, the personal penalty proceedings against the individuals named in the same notice conclude with it — and it should be pointed out expressly in the intimation.

Key takeaways

• Non-fraud: nil penalty both before the notice and within sixty days of it.
• Fraud: 15% before the notice, 25% within sixty days of the notice, 50% within sixty days of the order, 100% after.
• A written intimation is a statutory condition — a DRC-03 alone does not engage the sub-section.
• 74A(10): a shortfall in a pre-notice payment attracts a notice for the balance.
• 74A(11): self-assessed tax and tax collected, unpaid beyond thirty days, lose the nil-penalty benefit.
• Concluding the demand does not conclude s.132 prosecution, but does conclude co-noticees' s.122/125 penalties.

Read next

• Section 74A: 42 Months, 12 Months, and the ₹1,000 Floor
• The Suppression Allegation and How It Is Answered
• DRC-03 Voluntary Tax Payment — Before or After Notice
• Rule 88C and DRC-01B: GSTR-1 Versus GSTR-3B

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition).