Income Tax Penalty

The Income Tax Act, 1961, levies penalties on individuals if there has been any discrepancy in filing his/her taxes. These penalties are for defaults committed by the taxpayer. Some of the penalties are mandatory, while a few of them are at the discretion of the tax authorities. These rules are imposed on all individuals, corporations, or entities that are covered under the scope of the Income Tax Act. It is in your best interest to stay aware of the conditions related to the penalties applicable under this act.

Here’s a detailed list of the Income Tax Penalties:

1. Late Fee for E-Filing ITR

   If an individual fails to file ITR on or before the due date, a late fee of Rs. 200/- per day is levied. However, the late fee shall not exceed the TDS/TCS amount.

2. Penalty for Default in Furnishing ITR

   • If an individual doesn’t furnish ITR, he/she must pay an amount of:

     1. Rs. 5000/- if he/she furnishes return of income on or before December 31 of the assessment year.

     2. Rs. 10000/- otherwise

     3. Rs. 1000/- if his/her income does not exceed Rs. 5 Lakh.

3. Penalty for Underreporting or Misreporting of Income

   • If an individual tries to reduce tax by underreporting income, he/she will be imposed with a penalty of 50% of the tax payable on the underreported income.

   • If an individual tries to reduce tax by misreporting income, he/she is levied a penalty of 200% of the tax payable on the misreported income.

4. Penalty for Failure to Maintain Books of Account, Documents, etc.

   • If an individual fails to maintain books of accounts, documents, etc., he/she is liable to pay a penalty of Rs. 25000/-.

5. Penalty for Failure to Submit Accurate Information
   Any person responsible for paying any sum (whether or not tax-chargeable) to a non-resident or a foreign company must furnish the information related to the payment of said sum. In case of any failure in this regard, a penalty of Rs. 1,00,000/- is levied.

6. Penalty for Failure to File an International Transaction

   • If an individual fails to keep or maintain information and documents regarding an international transaction or specified domestic transaction / fails to report the same / furnishes incorrect information or documents regarding an international transaction or specified domestic transaction, a penalty equal to 2% of the value of each international transaction is imposed.

   • If an individual who is a constituent entity of an international group fails to furnish information and documents related to said international group, he/she may be liable to pay a penalty of Rs. 5,00,000/-.

7. Penalty for Undisclosed Income in Case of a Search

   • 30% of undisclosed income of the specified year if the individual admits the undisclosed income; substantiates the manner it was derived; and pays the tax on or before the specified date, together with interest.

   • 60% of undisclosed income of the specified year if not covered by the above provisions.

8. Penalty for Income from Undisclosed Sources

   • If an individual fails to disclose the nature or source of income, a penalty of 10% of the amount is levied. However, no penalty shall be levied if the income is disclosed in the income tax returns.

9. Penalty for Failure to Furnish Audit Report

   • If an individual fails to get his accounts audited, he/she is liable to pay a penalty of one-half percent of the total sales, turnover or gross receipts, etc., or Rs. 1,50,000/- whichever is less.

10. Penalty for Failure to Furnish a Report from the Accountant

    • If an individual makes an international transaction or a specified domestic transaction and fails to obtain a report from a CA, he/she is liable to pay a penalty of Rs. 1,00,000. 

11. Penalty for Not Deducting Tax at Source or Not Collecting Tax at Source

    • If an individual fails to deduct tax before making a payment or collect tax before receiving payment, he/she is liable to pay a penalty that is equal to the TDS/TCS.

12. Penalty for Not Paying Tax After Winning a Lottery

    • If an individual fails to pay tax after winning a lottery that exceeds Rs. 10000/-, he/she must pay a penalty equal to the tax amount.

13. Penalty for Failure to File TCS

    • If an individual fails to file TCS, a penalty equal to the tax amount is levied.

14. Penalty for Failure to Furnish the Statement of Financial Transaction

    • If an individual fails to furnish a statement of financial transaction or reportable account, he/she will be levied a penalty of Rs. 500 per day of default if he/she furnishes the same within the stipulated time of 30 days, after which a fine of 1,000 per day will be levied.

15. Penalty for Non-Filing or Inaccurate Filing of the Statement of Financial Transaction

    • If the taxpayer fails to file the statement of financial transaction, a penalty of Rs. 100/- will be levied per day, until the default is corrected within a stipulated time of 30 days of the notice issued. Non-compliance to this notice will impose a penalty of Rs. 500/- daily until complied.

    • In case of deliberately inaccurate filing of the same by the taxpayer, he/she will attract a penalty of up to Rs. 50,000/-.

16. Penalty for Accepting and/or Repaying Deposits and Loans in Cash
    If any deposit/loan/repayment exceeds Rs. 20,000/-, the payment must be done through payee cheque/demand draft/electronic transfer. Failing to do so attracts a penalty equal to the loan/deposit amount taken or the amount repaid.

17. Penalty for Non-Filing of TDS for More Than One Year
    If TDS/TCS is not filed for more than one year, a penalty amount ranging from Rs. 10,000/ to Rs. 100,000/- is levied. Also, an additional amount of Rs. 100/- is levied per day.

18. Penalty for Non-Cooperation with Income Tax Authority
    Every taxpayer is required to answer queries, provide information, or sign documents as requested by the income tax department. Non-compliance will result in a penalty of Rs. 10,000/- for each act non-compliance.

19. Penalty for Non-Compliance Related to Provision of PAN
    Furnishing PAN is mandatory certain financial transactions. Non-compliance to provide the same or giving wrong PAN information might result in a penalty of up to Rs. 10,000/-.

20. Penalty for Non-Compliance Related to Provision of TAN
    While filing Tax Deduction at Source (TDS) or Tax Collection at Source (TCS), the individual must submit the Tax Deduction Account Number (TAN). Failing to do so could attract a penalty of up to Rs. 10,000/-.

21. Penalty on Professionals for Furnishing an Incorrect Statutory Report or Certificate
    Guidelines regarding the certification of reports and certificates by a qualified professional have been provided in the Income Tax Act to ensure that the information furnished by the assessee is accurate. However, if a professional furnishes incorrect information, the Assessing Officer or the Commissioner can impose a penalty of Rs. 10,000/- on the professional for each such report or certificate.

22. Penalty for Failure to Furnish Report/for Furnishing an Inaccurate Report with Respect to an International Group

    If any reporting entity fails to furnish a report in respect of an international group:

    • A penalty of Rs. 5,000/- per day is levied if the period of failure does not exceed one month.

    • A penalty of Rs. 15,000/- per day is levied if the failure continues beyond the period of one month.

    If the reporting entity provides inaccurate information, it is liable to pay a penalty of Rs. 5,00,000/- subject to the satisfaction of conditions.