All you need to know- Penalty chart under Income Tax Act, 1961
Table of Content
Introduction
The timely and consistent payment of taxes and submission of returns guarantees that the government has funds available for public welfare at all times. There are many penalties specified in the Income Tax Act, 1961 to ensure that the taxpayer does not default in his or her ITR filing obligations or information disclosure. A penalty is a sanction levied against the taxpayer for not complying with timely ITR filing. So in this blog, we will provide all penalties imposed on the taxpayer in a penalty chart under the Income Tax Act, 1961 format which consists of columns like section, nature of the default, and penalties and benefits of filing ITR.
Penalty chart under Income Tax Act, 1961
The penalty chart under Income Tax Act, 1961 specifies the section under which a penalty can be imposed, the nature of the default, and the amount of the penalty levied:
|
Sr. No. |
Section |
Nature of Default |
Penalties |
|
1 |
140A(3) |
When a taxpayer fails to pay a part or whole self-assessment tax or interest or fee as specified under section 140A (1) |
Any amount that the Assessing Officer deems appropriate, but not more than tax arrears |
|
2 |
221 (1) |
When a taxpayer fails to pay tax |
Any amount that the Assessing Officer deems appropriate, but not more than tax arrears |
|
3 |
234E |
When a taxpayer is submitting a statement after the deadline specified in subsection 200(3) or the provison to section 206C (3). In simple words, when a person fails to file TDS/TCS on or before the prescribed due date. |
They have to pay Rs. 200 for each day the failure continues, up to the maximum amount that is tax deductible or recoverable. |
|
5 |
234F |
When a taxpayer fails to provide a return of income within the timeframe required under section 139 (1)
|
The taxpayer has to pay a fine of Rs. 5,000 fails to furnish the return within the due date |
|
6 |
234 |
When the taxpayer fails to file the statement or certificate required by section 35 and Section 80G. |
They have to pay Rs. 200 each day |
|
7 |
270A(1) |
When the taxpayer fails to report and misreport the income |
A payment equal to 50% of the taxable income on under-reporting income. Taxpayers pay 100% penalty rate when the under-report results in misreport. |
|
8 |
271A |
When a taxpayer fails to keep, maintain or retain books of accounts, documents etc. as necessary under section 44AA |
The penalty of Rs. 25,000 |
|
9 |
271AA (1) |
|
Each international transaction or particular local transaction that the taxpayer engages in will result in a penalty of 2% of its value. |
|
10 |
271AA (2) |
When a person being a constituent entity of an international group fails to provide information and documents as required under section 92D(4). |
He is liable to pay Rs 5,00,000 |
|
11 |
271AAB |
When a search is started on or after 1/7/2012 to 15/12/2016 and any hidden income is found during the search. |
(a) 10% of the undisclosed income of the specified previous year if the assessee confirms the undisclosed money, shows how it was obtained, pays the tax and interest within the due date, and provides the return of income for the specified previous year stating the undisclosed income. (b) 20% of the unreported income from the stated previous year, provided the assesse declares the income in the return of income provided for the specified previous year on or before the specified date and pays the tax due, plus interest. (c) 60% of the undisclosed income prescribed in the previous year if it is not covered by (a) or (b) above. |
|
12 |
271AAB(1A) |
When a search is started on or after 15/12/2016 and any hidden income is found during the search. |
(a) If the assesse admits the unreported income, proves how it was obtained, pays the tax and interest on or before the time limit, and provides the return of income for the unreported income of the specified previous year, the tax is reduced by 30% of the unreported income of the specified previous year. (b) If not covered by the stated provision, 60% of undisclosed income of the specified previous year. |
|
13 |
271AAC |
The Assessing officer can ask the taxpayer to edit when he fails to explain the nature and source of income as prescribed under the Act. |
10% of tax payable under section 115BBE. |
|
14 |
271AAD |
Penalty, if during any proceedings under the Act, it is found that books of accounts maintained by assessee, there is: a) A false entry; or b) Any entry relevant to the computation of the total income of such person has been omitted to evade tax liability. |
100% of such false entries or omitted entry |
|
15 |
271AAE |
Penalty for 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. |
(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”). |
|
16 |
271B |
When the taxpayer fails to get the accounts audited or furnish a report of audit as required under section 44AB. |
One-half per cent of total sales, turnover or gross receipts, etc., or Rs. 1,50,000, whichever is less. |
|
17 |
271BA |
When the taxpayer fails to furnish a report from an accountant as required by section 92E. |
Rs. 1,00,000 |
|
18 |
271C |
Failure to deduct tax at source, wholly or partly, under sections 192 to 196D (Chapter XVII-B) or second proviso to section 194B. |
The penalty of an amount equal to tax not deducted or paid. |
|
19 |
271CA |
Failure to collect tax at source as required. |
The penalty of an amount equal to tax not collected. |
|
20 |
271D |
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, about the transfer of immovable property, whether or not the transfer takes place. |
An amount equal to loan or deposit or specified sum so taken or accepted. |
|
21 |
271DA |
Receipt of an amount of Rs. 2 lacks or more in contravention of provisions of Section 269ST. |
Rs. 5,000 rupees for every day of default. |
|
22 |
271E |
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 like an advance, by whatever name called, about the transfer of immovable property, whether or not the transfer takes place. |
An amount equal to loan or deposit or specified advance so repaid |
|
23 |
272A |
Refusal or failure to answer questions, sign statements, attend to give evidence or produce books of account, etc., in compliance with a summons under section 131(1) and comply with notices u/s 142(1)/143(2) or failure to comply with a direction issued u/s 142(2A). |
The fine up-to Rs. 10,000 for each failure or default. |
|
24 |
272BB (1) |
When a person deducting tax at source or collecting tax at source fails to obtain Tax Deduction Account Number or Tax Collection Account Number as per section 203A (1). |
Such a person has to pay a penalty of Rs. 10,000. |
|
25 |
272BB (1) |
When a person quotes an incorrect Tax Deduction Account Number or Tax Collection Account Number when deducting tax at source or collecting tax at source as per section 203A (2). |
Such a person has to pay a penalty of Rs. 10,000 |
|
26 |
271K |
The penalty of default in the submission of a statement/certificate is prescribed under section 35/ Section 80G. |
Rs. 10,000 to Rs. 1 lakh |
|
27 |
271DB |
Failure to provide a facility for accepting payment through prescribed electronic modes of payment as referred to in section 269SU. |
Rs. 5,000 rupees for every day of default |
Suggested Read – TDS Rate Chart
What are the benefits of filing an ITR?
Filing of Income Tax Return (ITR) is not only a regulatory requirement but also offers several benefits to taxpayers. Here is a detailed look at the benefits of filing ITR:
- Compliance with Tax Laws: Filing of ITR ensures compliance with the tax laws mandated by the Income Tax Act, 1961. It shows that you are fulfilling your civic duty by reporting your income and paying taxes honestly and promptly.
- Proof of income: The ITR serves as an official record of your income. It can be crucial for various purposes, such as applying for loans, visas, scholarships or government subsidies where proof of income is required.
- Entitlement to a tax refund: When the taxes deducted exceed the actual tax liability, filing an ITR allows you to claim a refund. This usually occurs when taxes are deducted at source (TDS) from salary or other sources of income but exceed the tax payable after deductions and exemptions.
- Carry forward losses: Filing ITR allows you to carry forward losses incurred during the financial year. Business losses, capital gains or speculative transactions can be carried forward and set off against future profits, reducing tax liability in subsequent years.
- Avoidance of criminal consequences: Non-filing or late filing of ITR may attract penalties under the Income Tax Act, including interest on unpaid taxes and late filing charges. By filing your ITR on time, you can avoid these penalties and maintain a clean tax record.
- Financial discipline and plannin: Regular filing of ITR promotes financial discipline. It encourages you to keep proper records of income, investments and expenses, which is crucial for effective financial planning and management.
- Loan approval and processing of visas: Banks and financial institutions often require ITR as proof of income while assessing loan applications. Similarly, visa authorities may ask ITR to verify financial stability and compliance with tax laws when applying for visas to foreign countries.
- Building creditworthiness: Consistent filing of ITR helps in building a strong financial profile. It reflects the stability of your income and responsible financial behavior, increases your credit rating and improves access to credit facilities at competitive rates.
- Compliance with GST and TDS regulations: Businesses and professionals registered under GST or subject to Tax Deduction at Source (TDS) provisions are required to file ITR. It ensures compliance with these Indirect Tax and TDS regulations and facilitates smooth business operations.
- Contribution to nation building: Filing of ITR is a direct contribution to nation building efforts. The collected taxes are used by the government for infrastructure development, welfare programs, health care, education and other public services that benefit society as a whole.
Consequences of penalties
The consequences of penalties under the Income Tax Act can be profound and go beyond financial consequences. Here are some key implications:
-
Financial Burden: Penalties impose additional financial obligations on taxpayers, increase overall tax outflow and reduce disposable income.
-
Accrual of interest: In addition to penalties, interest on unpaid taxes or late payments can accrue, increasing the financial impact over time.
-
Legal action: Persistent non-compliance or willful avoidance of taxes may lead to legal action, including prosecution in serious cases of concealment or misreporting.
Impact on reputation: Tax non-compliance can damage the reputation of individuals and businesses and affect their credibility with stakeholders such as creditors, investors and business partners.
Mitigation and seeking relief
While penalties are strict measures to enforce tax compliance, taxpayers have ways to mitigate penalties and seek relief in certain circumstances:
-
Reasonable Cause: Taxpayers can invoke penalty relief by showing reasonable cause for non-compliance, such as genuine hardship or unforeseen circumstances beyond their control.
-
Voluntary Disclosure: Voluntary disclosure of income irregularities or errors prior to detection by the tax authorities may result in leniency in the imposition of penalties.
-
Taxpayer Assistance Programs: Tax authorities may offer taxpayer assistance programs or amnesty programs to encourage voluntary compliance and provide relief from penalties.
Conclusion
In conclusion, the Indian Income Tax Act, 1961 imposes a number of penalties to ensure tax compliance. These penalties, as outlined in the income tax penalty chart, relate to various aspects such as late filing of tax returns, late payment of taxes, understatement or concealment of income, failure to maintain books of account, non-compliance with TDS/TCS provisions, and others. The income tax penalty chart structures penalties to encourage timely and accurate tax reporting while discouraging non-compliance. Taxpayers should be aware of these penalties to avoid financial consequences and legal issues and are advised to stay informed of updates and amendments to the Income Tax Act to ensure compliance with current regulations. Seeking advice from tax professionals can also help navigate the complexities of tax laws and minimize exposure to penalties under the Income Tax Act, 1961.
FAQ On Income Tax Penalty
1. What is the Income Tax Penalty Schedule and why is it important to taxpayers?
The Income Tax Penalty Chart lists the penalties and fees imposed by the tax authorities for various violations such as late filing, late payment, underpayment of estimated taxes, and other violations of tax laws. It is important that taxpayers understand these penalties to avoid financial consequences.
2. How are penalties calculated according to the schedule of income tax penalties for 2024?
Penalties are usually calculated based on the amount owed and the length of the delay or arrears. Specific rates and terms are detailed in the penalty table, which varies by jurisdiction.
3. What are the common penalties listed in the Income Tax Penalty Table for 2024?
Common penalties include late filing penalties, late payment penalties, quarterly tax understatement penalties, and penalties for negligent or material understatement of tax liabilities.
4. When does the penalty period start as per Income Tax Penalty Table 2024?
The penalty period often begins to run from the due date of the tax return or the due date of the tax owed. It may vary depending on the type of sanction given.
5. Is there a difference in penalties based on the type of taxpayer (individual, company, etc.) according to the 2024 penalty table?
Yes, the penalties may vary depending on the type of taxpayer and the nature of the tax liability. For example, corporations may face different penalties compared to individual taxpayers for similar violations.
6. Can the penalties listed in the Income Tax Penalty Table for 2024 be waived or reduced?
Under certain circumstances, penalties may be waived or reduced. Taxpayers can usually request a reduction of the penalty if they can demonstrate a reasonable reason for not fulfilling their tax obligations.
7. How do I access the income tax penalty table for 2024?
A table of penalties is usually available on the official website of the tax authority (eg IRS in the United States, HMRC in the United Kingdom). It may also be part of tax guides and publications provided by these authorities.
8. What should I do if I receive a penalty notice based on the 2024 Income Tax Penalty Table?
If you receive a penalty notice, read it carefully to understand the reason for the penalty and the amount assessed. Depending on the circumstances, you may be able to appeal or apply for penalty relief.
9. What happens if I can’t pay the penalties listed in the 2024 Income Tax Penalty Table?
Failure to pay the penalty may result in additional charges, such as interest on the unpaid amount. It is important to communicate with the tax authority and explore payment options or installment agreements to avoid further consequences.
10. Are there resources or tools available to help me understand and calculate penalties based on the 2024 Income Tax Penalty Table?
Yes, tax preparation software, tax guides, and resources provided by the IRS often include calculators and detailed explanations to help taxpayers understand and comply with the penalty provisions listed in the table.
Leave a Comment