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Navigating India’s income tax laws is crucial for individuals and businesses to stay compliant and avoid hefty penalties. The Income Tax Department imposes various penalties and prosecutions for non-compliance, including late filings, inaccurate disclosures, tax evasion, and non-payment of dues. Understanding these consequences helps taxpayers take preventive measures and fulfill their obligations under the Income Tax Act.
In this guide, we will break down key offenses, their penalties, and legal actions taxpayers may face for violations. Whether you are a business owner, salaried individual, or tax consultant, knowing these provisions can help you avoid unnecessary legal troubles and financial liabilities.
Disclaimer: The contents of this document are for information purposes only. This aims to enable the public to have quick and easy access to information and does not purport to be a legal document. Viewers are advised to verify the content from the Government Acts/Rules/Notifications, etc.
Source of Article – Income Tax India
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Nature of default – Failure to pay wholly or partly
(a) Self-assessment tax, or
(b) Interest and fee, or
(c) Both under section 140A(1)
Penalty leviable – Such amount as the Assessing Officer may impose but not exceeding the tax in arrears
Nature of default – Determination of undisclosed income of block period
Penalty leviable –
• Minimum: 100 per cent of tax leviable in respect of undisclosed income
• Maximum: 300 per cent of tax leviable in respect of undisclosed income
Nature of default – Default in making payment of tax
Penalty leviable – Such amount as the Assessing Officer may impose but not exceeding the amount of tax in arrears
Nature of default – Failure to file statement within time prescribed in section 200(3) or in the proviso to section 206C(3)
Penalty leviable – Rs. 200 for every day during which failure continues, but not exceedingthe tax deductible/collectible
Nature of default – Default in furnishing the return of income within the time prescribed in section 139(1)
Penalty leviable – Rs. 5,000 if return is furnished after the due date specified under section 139(1).
However, if the total income of the person does not exceed Rs. 5 lakhs, then Rs. 1,000 shall be the late filing fee.
Nature of default – Fee for default in submission of statement/certificate prescribed under section 35/Section 80G
Penalty leviable – Rs. 200 per day
Nature of default – Fee for default in intimating the Aadhaar Number
Penalty leviable –
a) Rs. 500, if such intimation is made between 01-04-2022 and 30-06-2022
b) Rs. 1,000, in all other cases
Nature of default – Under-reporting and misreporting of income
Penalty leviable –
• A sum equal to 50% of the amount of tax payable on under-reported income. However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income
Failure to keep, maintain, or retain books of account, documents, etc., as required under section 44AA
Rs. 25,000
Nature of default – (1) Failure to keep and maintain information and documents required by section 92D(1) or 92D(2)
(2) Failure to report such a transaction
(3) Maintaining or furnishing incorrect information or documents
Penalty leviable – 2% of the value of each international transaction/or specified domestic transaction entered into
Nature of default – Failure to furnish information and document as required under Section 92D(4)
Penalty leviable – Rs. 5,00,000/-
Nature of default – Where search has been initiated before 1-7- 2012 and undisclosed income found
Penalty leviable –
10% of undisclosed income
Nature of default – Where search has been initiated on or after 1-7- 2012 but before 15-12-2016 and undisclosed income found
Penalty leviable – (a) 10% of undisclosed income of the specified previous year if assessee admits the undisclosed income; substantiates how it was derived; and on or
before the specified date, pays the tax, together with interest thereon, and furnishes the return of income for the specified previous year, declaring such undisclosed income
(b) 20% of the undisclosed income of the specified previous year if assessee does not admit the undisclosed income, and on or before the specified date, declare such income in the return of income furnished for the specified previous year and pays the tax, together with interest thereon;
(c) 60% ofthe undisclosed income of the specified previous year if it is not covered by (a) or (b) above
Nature of default – Where search has been initiated on or after 15- 12-2016 and undisclosed income found
Penalty leviable – (a) 30% of undisclosed income of the specified previous year if assessee admits the undisclosed income; substantiates how it was derived; and on or before the specified date pays the tax, together with interest thereon and furnishes the return of income for the specified previous year declaring such undisclosed income.
(b) 60% of the undisclosed income of the specified previous year in any other case.
Nature of default – Income determined by Assessing Officer or the Commissioner (Appeals) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C, or section 69D for any previous year (if such income is not included by assessee in his return or tax in accordance with section 115BBE has not been paid)
Penalty leviable – 10% of tax payable under section 115BBE
Nature of default – If during any proceedings under the Act, it is found that in the books of accounts maintained by the assessee, there is:
(a) A false entry; or
(b) Any entry relevant for the computation of the total income of such a person has been omitted to evade tax liability.
Penalty leviable – 100% of such false entries or omitted entries
Nature of default – Violation of the provisions of the 21st proviso to section 10(23C) or section 13(1)(c) pertaining to passing of unreasonable benefits to trustees or specified persons
Penalty leviable –
(a) For the first violation: to the extent of income applied by the institution for the benefit of any interested party referred to in section 13(3)
(b) For any violation in subsequent years: twice the amount of such income so applied (“double penalty”)
Nature of default – Failure to get accounts audited or furnish a report of audit as required under section 44AB
Penalty leviable – One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less
Nature of default – Failure to furnish a report from an accountant as required by section 92E
Penalty leviable – Rs. 1,00,000
Nature of default – Failure to subscribe any amount to units issued under the scheme referred to in section 88A(1)
Penalty leviable – 20 per cent of such amount
Nature of default – Failure to deduct tax at source, wholly or partly, under sections 192 to 196D (Chapter XVII-B) or failure to pay wholly or partly tax u/s 115- O(2) or proviso to section 194B, or failure to pay or ensure payment of tax as required by 115-O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2).
Penalty leviable – Amount equal to tax not deducted or paid
Nature of default – Failure to collect tax at source as required under Chapter XVII-BB
Penalty leviable – Amount equal to tax not collected
Nature of default – Taking or accepting any loan or deposit or specified sum in contravention of the provisions of Section 269SS.
“Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property, whether or not the transfer takes place.
Penalty leviable – Amount equal to the loan or deposit or specified sum so taken or accepted
Nature of default – Receiving an amount of Rs. 2 lakh or more from a person in a day [section 269ST]
Penalty leviable – Amount equal to such receipt
Nature of default – Failure to provide a facility for accepting payment through prescribed electronic modes of payment as referred to in section 269SU
Penalty leviable – Rs. 5,000 rupees for every day of default
Nature of default – Repayment of any loan or deposit or specified advance otherwise than in accordance with the provision of Section 269T.
“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.
Penalty leviable – Amount equal to loan or deposit or specified advance so repaid
Nature of default – Failure to furnish an annual information return as required under section 285BA(1)2
Penalty leviable – Rs. 500 per day of default
Nature of default – Failure to furnish annual information return within the period specified in notice u/s 285BA(5)
Penalty leviable – Rs. 1,000 per day of default
Nature of default – Failure to furnish a statement under section 285BA or failure to furnish a correction statement within the specified period or failure to comply with the due diligence requirement
Furnishing of inaccurate information by reporting financial institution and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts
Penalty leviable – Rs, 5,000 for every inaccurate reportable account
Nature of default – Section 9A provides that fund management activity carried out by an eligible offshore investment fund through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India (subject to certain conditions).
The provision requires that eligible investment fund shall furnish within 90 days from the end of the financial year a statement, in respect of its activities in a financial year, in the prescribed form containing information relating to fulfilment of specified conditions and such other information or documents as may be prescribed. Penalty to be levied if investment fund failed to comply with the requirement.
Penalty leviable – Rs. 5,00,000
Nature of default – Failure to furnish any information or document as required by section 92D(3)
Penalty leviable – 2% of the value of the international transaction/specified domestic transaction for each failure
Nature of default – Section 285A provides for reporting by an Indian concern if following two conditions are satisfied:
a) Shares or interest in a foreign company or entity derive substantial value, directly or indirectly, from assets located in India; and
b) Such foreign company or entity holds such assets in India through or in such Indian concern.
In this case, the Indian entity shall furnish the prescribed information for the purpose of determination of any income accruing or arising in India under Section 9(1)(i).
In case of any failure, the Indian concern shall be liable to pay penalty.
Penalty leviable – Penalty shall be:
a) a sum equal to 2% of value of transaction in respect of which such failure has taken place, if such transaction had effect of, directly or indirectly, transferring right of management or control in relation to the Indian concern;
b) a sum of Rs. 5,00,00 in any other case.
Nature of default – Failure to furnish report under section 286(2)
Penalty leviable – Rs. 5,000 per day up to 30 days and Rs. 15,000 per day beyond 30 days
Nature of default – Failure to produce information and documents within the period allowed under section 271GB(6)
Penalty leviable – Rs. 5,000 for every day during which the failure continues
Nature of default – Failure to furnish report or failure to produce information/documents under section 286 even after serving order under section 271GB(1) or 271GB(2)
Penalty leviable – Rs. 50,000 for every day for which such failure continues from the date of serving such order
Nature of default – Failure to inform about inaccuracy in report furnished under section 286(2) or furnishing of inaccurate information/documents in response to notice issued under section 286(6)
Penalty leviable – Rs. 5,00,000
Nature of default – Failure to submit a statement under section 285 by a non-resident having a liaison office in India (applicable from April 1, 2025)
Penalty leviable – Rs. 1,000 per day of failure, up to 3 months; or Rs. 1,00,000 in any other case
Nature of default – Failure to deliver/cause to be delivered a statement within the time prescribed in section 200(3) or the proviso to section 206C(3), or furnishes incorrect information in the statement
Penalty leviable – W.e.f. 1-10-2014 Assessing Officer may direct payment of penalty. Penalty shall not be less than Rs. 10,000 but may extend to Rs. 1,00,000
Nature of default – Penalty of default in submission of statement/certificate prescribed under section 35/Section 80G
Penalty leviable – Rs. 10,000 to Rs. 1 lakh
Nature of default – As per section 195(6) of the Act, any person responsible for paying to a non-resident or to a foreign company, any sum (whether or not chargeable to tax), shall furnish the information relating to such payment in Form 15CA and 15CB. Penalty shall be levied in case of any failure.
Penalty leviable – Rs. 1,00,000
Nature of default – Furnishing incorrect information in any report or certificate by an accountant, merchant banker, or registered valuer
Penalty leviable – Rs. 10,000 for each incorrect report or certificate
Nature of default – Refusal or failure to:
(a) Answer questions
(b) Sign statements
(c) Attend to give evidence or produce books of account, etc., in compliance with summons under Section 131(1)
(d) comply with notice u/s 142(1), 143(2) or failure to comply with direction issued u/s 142(2A).
Penalty leviable – Rs. 10,000 for each failure/default
Nature of default – Failure to:
(a) Furnish requisite information in respect of securities as required under Section 94(6)
(b) Give notice of discontinuance of business or profession as required under Section 176(3)
(c) Furnish in due time returns, statements, or certificates, deliver declarations, allow inspection, etc., under Sections 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A), and 285B
(d) Deduct and pay tax under Section 226(2)
(e) File a copy of the prescribed statement within the time specified in Section 200(3) or the proviso to Section 206C(3) (up to 1-7-2012)
(f) File the prescribed statement within the time specified in Section 206A(1)
(g) Deliver or cause to be delivered a statement under Section 200(2A) or Section 206C(3A) within the prescribed time
Penalty leviable – Rs. 500 for every day during which the failure continues. (In respect of penalty for failure, in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and returns u/ss 206 and 206C and statements under Section 200(2A) or section 200(3) or proviso to section 206C(3) or section 206C(3A), penalty shall not exceed amount of tax deductible or collectible)
Nature of default – Failure to comply with Section 133B
Penalty leviable – Not exceeding Rs. 1,000
Nature of default – Failure to comply with provisions relating to PAN or Aadhaar as referred to in section 139A/139A(5)(c)/(5A)/(5C)
Penalty leviable – Rs. 10,000 for each default
Nature of default – Failure to comply with section 203A
Penalty leviable – Rs. 10,000 for each failure/default
Nature of default – Quoting false tax deduction account number/tax collection account number/tax deduction and collection account number in challans/certificates/statements/documents referred to in section 203A(2)
Penalty leviable – Rs. 10,000
Note: No penalty is imposable for any failure under sections 271(1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FAB, 271FB, 271G, 271GA, 271GB, 271H, 271-I, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1), 273(1)(b), 273(2)(b) and 273(2)(c) if the person or assessee proves that there was reasonable cause for such failure (section 273B). Section 273AA provides that a person may make an application to the Principal Commissioner/Commissioner for granting immunity from penalty, if (a) he has made an application for settlement under section 245C and the proceedings for settlement have abated; and (b) penalty proceedings have been initiated under this Act. The application shall not be made after the imposition of a penalty after abatement.
Nature of default – Contravention of order made under section 132(1) (Second Proviso) or 132(3) in case of search and seizure
Punishment – Up to 2 years rigorous imprisonment
Fine – No limit
Nature of default – Failure to afford necessary facilities to an authorized officer to inspect books of account or other documents as required
Punishment – Up to 2 years rigorous imprisonment
Fine – No limit
Nature of default – Removal, concealment, transfer, or delivery of property to thwart tax recovery
Punishment – Up to 2 years rigorous imprisonment
Fine – No limit
Nature of default – Failure to comply with provisions of section 178(1) and (3) re: company in liquidation
Punishment – 6 months to 2 years
Fine – –
Nature of default – Failure to pay to credit of Central Government (i) tax deducted at source under Chapter XVII-B (non-cognizable offence under section 279A), or proviso to section 194B, or failure to pay or ensure payment of tax as required by section 115O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2).
Note: The provision of this section shall not apply if payment in respect to TDS has been made to the credit of the Central Government at any time on or before the time prescribed for filing the TDS statement in respect to such payment. (Applicable w.e.f 01-10-2024)
Punishment – 3 months to 7 years
Fine – No limit
Nature of default – Failure to pay the tax collected under the provisions of section 206C
Punishment – 3 months to 7 years
Fine – No limit
Nature of default – Wilful attempt to evade tax, penalty, or interest (non-cognizable offence under section 279A)
Punishment:
(a) Where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012): 6 months to 7 years rigorous imprisonment
(b) In other cases: 3 months to 3 years rigorous imprisonment (2 years w.e.f. 1-7-2012)
Fine – No limit
Nature of default – Wilful attempt to evade payment of any tax, penalty, or interest (non-cognizable offence under section 279A)
Punishment: 3 months to 3 years rigorous imprisonment (2 years w.e.f. 1-7-2012)
Fine – No limit
Nature of default – Wilful failure to furnish return of income under section 139(1), section 139(8A), or in response to a notice under section 142(1), section 148, or section 153A (non-cognizable offence under section 279A)
Punishment:
(a) Where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012): 6 months to 7 years rigorous imprisonment
(b) In other cases: 3 months to 3 years rigorous imprisonment (2 years w.e.f. 1-7-2012)
Note: A person shall not be liable to be prosecuted under this section if he furnishes the return before expiry of assessment year or the tax payable by such person, not being a company, as reduced by the advance tax self-assessment tax paid before expiry of the assessment year, TDS and TCS, does not exceed Rs. 10,000.
Fine – No limit
Nature of default – Wilful failure to furnish in due time return of total income required to be furnished by notice u/s 158BC(1)(a)
Punishment – 3 months to 3 years
Fine – No limit
Nature of default – Wilful failure to produce accounts and documents under section 142(1) or to comply with a notice under section 142(2A)
Punishment: Up to 1 year rigorous imprisonment
Fine – Rs. 4 to Rs. 10 for every day of default
Nature of default – False statement in verification or delivery of false account, etc. (non-cognizable offence under section 279A)
Punishment:
(a) Where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012): 6 months to 7 years rigorous imprisonment
(b) In other cases: 3 months to 3 years rigorous imprisonment (2 years w.e.f. 1-7-2012)
Fine – No limit
Nature of default – Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or interest chargeable/leviable under the Act
Punishment – 3 months to 3 years (2 years w.e.f. 1-7- 2012)
Fine – No limit
Nature of default – Abetment of false return, account, statement or declaration relating to any income or fringe benefits chargeable to tax (non-cognizable offence under section 279A)
Punishment – (a) where tax, penalty or interest sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) – 6 months to 7 years – Fine – No Limit
Punishment – (b) in other cases – 3 months to 3 years (2 years w.e.f. 1-7- 2012) – Fine – No Limit
Nature of default – Second and subsequent offences under sections 276B, 276BB, 276C(1), 276CC, 276DD, 276E, 277, or 278
Punishment – 6 months to 7 years rigorous imprisonment
Fine – No limit
Nature of default – Disclosure of particulars by public servants in contravention of section 138(2)
Punishment – Up to 6 months (simple or rigorous imprisonment)
Fine – No limit
1. No person is punishable for any failure under section 276A, 276AB or 276B if he proves that there was reasonable cause for such failure (vide section 278AA).
2. (a) Prosecution for offences under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277, section 277A and section 278 to be instituted with previous sanction of Principal Director General/Principal Chief Commissioner/Principal Commissioner/Director General/Chief Commissioner/Commissioner, except where prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority (vide section 279).
(b) The offences under Chapter XXII can be compounded (either before or after the institution of proceedings) by Principal Director General/Director General or Principal Chief Commissioner/Chief Commissioner.
3. Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, such company shall be punished with fine and every person, referred to in sub-section (1) of section 278B, or the director, manager, secretary or other officer of the company referred to in sub-section (2) of section 278B shall be liable to be proceeded against and punished in accordance with the provisions of this Act.
4. With effect from 1-4-2008 under section 278AB a person may apply to the Principal Commissioner/Commissioner for granting immunity from prosecution, if he has applied for settlement under section 245C and the proceedings have abated under section 245HA. The application shall not be made after institution of prosecution proceedings after abatement.
————
1. With effect from assessment year 2015-16 “annual information return” has been changed to “statement of financial transaction or reportable account” and word “return” has been changed to “statement”.
2. With effect from assessment year 2015-16 a new section 271FAA has been inserted to provide for a penalty of Rs. 50,000 for furnishing inaccurate statement of financial transaction or reportable account in certain cases.
3. With effect from 1-10-2014 TPO can also levy penalty.
4. Section 271H as amended with effect from 1-10-2014 provides that penalty shall be levied by Assessing Officer.
5. Non-operative with effect from 1-7-2002.
6. With effect from October 1, 2014, if a person wilfully fails to produce accounts and documents as stated or wilfully fails to comply with the direction given, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine (quantum of fine has not been specified).
7. No limit w.e.f. 1-10-2014.
Income tax compliance is essential to avoid severe penalties and legal actions. Understanding the provisions of penalties and prosecutions under the Income Tax Act helps taxpayers in better financial planning. Filing your income tax return on time, maintaining transparency in income reporting, and adhering to tax laws ensure smooth business operations and peace of mind.
E Accountax Manager simplifies tax compliance with expert guidance and seamless services. Whether you need assistance in filing your income tax return, ensuring adherence to tax laws, or seeking Virtual CFO Services, our team is here to help. Stay compliant and stress-free with our professional support. Contact us today for hassle-free tax solutions!
CA Jitendra Agarwal, a Chartered Accountant, is an experienced Income Tax Advisor with a proven track record in tax planning and compliance.
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