Various Penalties Under the Income Tax Act: A compilation

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Various Penalties Under the Income Tax Act:

A compilation

 

There are various penalties for various defaults in the Income Tax Act- 1961. Here is a compilation of the same for the benefit of the taxpayers:

Failure to maintain books of accounts and other documents

  1. Normally, the amount of penalty leviable is Rs. 25000/-
  2. In case, the assessee is a person who has entered into international transaction, the penalty will be 2% of the value of such international transactions or specified domestic transactions

Default in making payment of tax

The amount of penalty leviable will be as determined by the Assessing Officer. However, the amount will not exceed the amount of tax in arrears

Mis-Reporting of Tax or Under-reporting of income [Section 270A]

If the income assessed/ re-assessed exceeds the income declared by the assessee, or in cases where return has not been filed and income exceeds the basic exemption limit, penalty @ 50% of tax payable on such under reported income shall be levied.

Penalty @ 200% of the tax is payable if under-reporting results from misreporting of income

Undisclosed income Taxed u/s 115BBE

  1. Where the income determined includes undisclosed income, a penalty @10% is payable. However, no such penalty will be leviable, if such income was included in the return and tax was paid before the end of the relevant previous year.
  2. Where Search has been initiated on/ after 1/7/2012 but before 15/12/2016,
    a) If undisclosed income is admitted during the course of search and assessee pays tax and interest and files return, a penalty @ 10% of such undisclosed income is payable.
    b) If undisclosed income is not admitted but the same is furnished in the return filed after such search, 20% of such undisclosed income is payable.
  3. c)In all other cases, penalty is leviable @ 60%
  4. Where Search has been initiated on/ after 15/12/2016,
    a) If undisclosed income is admitted during the course of Search and assessee pays tax and interest and files return, a penalty @ 30% of such undisclosed income is payable.
    b) In all other cases, penalty is leviable @ 60%

Audit and Audit Report

If the assessee fails to get his accounts audited, obtain audit report, or furnish report of such auditor, a penalty will be leviable at the ₹1,50,000 or ½% of the total sale/ Turnover/ gross receipts whichever is lesser.

Failure of assessee to furnish Audit report related to foreign transaction, a penalty @ ₹1,00,000 will be payable

TDS/TCS

Where a person fails to deduct tax at source, he will be liable to pay a penalty equal to the amount of tax which he has failed to deduct/ pay.

Where a person fails to collect tax at source, he will be liable to pay a penalty equal to the amount of tax which he has failed to collect.

Failure to furnish TDS/TCS statement or furnishing incorrect statements, shall attract a penalty ranging from ₹10,000 to ₹1,00,000

Failure to furnish information/ furnishing inaccurate information related to TDS deduction related regarding Non residents shall attract a penalty of ₹100,000

Penalty for loans and deposits acceptance / repayment by any modes other than Account payee cheque/ draft/ ECS:

If a person takes/ accepts loan/ deposit except by way of Account payee cheque/ account payee draft/ ECS, and if the aggregate amount exceeds ₹20,000, he shall be liable to pay a penalty of an amount equal to such loan/ deposit.

If, an amount of ₹2,00,000 or more is received in aggregate from a person in a day/ single transaction/ relating to one event, a penalty equal to such amount will be payable.

If a person repays loan/ deposit and such amount so repaid exceeds ₹20,000 and such amount has been repaid except by way of Account payee cheque/ account payee draft/ ECS, an amount equal to such loan/ deposit shall be payable.

Penalty for false entry such as fake invoices

In case the income tax officer notices that the books of accounts provided by the assessee in the proceeding contains the following:

  1. Forged or falsified documents such as a fake invoice or a false piece of documentary evidence
  2. An invoice in respect of supply or receipts of goods or services issued by any person without actual supply or receipt of goods or services
  3. Any invoice of supply or receipt of goods or services received from a person who does not exist
  4. Any omission of any entry which is relevant for computation of total income.

In such case, assessee might have to pay a penalty of the amount equal to sum of such false or omitted entries.

Failure to furnish statements/ information

Failure to furnish a statement of financial transaction or reportable account shall attract a penalty of ₹500 for each day of failure. And if the failure is in response to a notice to report on specified financial transaction, the penalty shall be ₹1,000 for each day of failure

A penalty of ₹50,000 shall be attracted for furnishing inaccurate statement of a financial transaction/ reportable account

Failure of an eligible investment fund to furnish any statement / information/ documents within the prescribed time shall attract a penalty of ₹5,00,000

Failure to furnish any information/ document in relation to international transaction shall attract a penalty of 2% of the value of such transaction

Failure to furnish any information/ document by an Indian Concern related with international transaction, shall attract a penalty of 2% of the value of transaction or ₹50,000 in some cases.

If a report/ certificate is required to be furnished by an Accountant/ Merchant Banker/ Registered Valuer and such information is found to be incorrect, a penalty of ₹10,000 for each incorrect report/ information is payable

Failure to furnish information by any person who is attending/ helping carrying the business/ profession of any person, in whose building/ place the income tax authority has entered for collecting information shall attract a penalty of upto ₹1,000

Non furnishing of report by any reporting entity which is obliged to furnish Country by Country report will attract penalty as under:

Period of delay Penalty
 Less than or equal to 1 month ₹5000 per day
Continuing default ₹50,000 per day from the beginning of service of order
Submission of inaccurate information ₹5,00,000

 

Others Penalty:

Failure to apply/quote/ intimate PAN/ quoting false PAN shall attract a penalty of ₹10,000

Failure to apply/quote TAN/ quoting false TAN shall attract a penalty of ₹10,000

In case of the following defaults, ₹10,000 will be the penalty leviable,

Refusal to answer questions put by the department

Refusal to sign statements made in income tax proceedings

Non-compliance with summons to give evidence/ produce books of accounts

Failure to comply with a notice

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