Estimated Tax penalty

An Income Tax penalty is a punitive measure which applies to assessees who make default in compliance with the Income Tax Act. The Act has introduced various penalties for contraventions committed by taxpayers. The penalty prescribed as per the Income Tax Act can either be mandatory or leviable at the discretion of a tax authority. In this article, the various income tax penalties are discussed.

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 Failure to Comply with Notice

According to the Income Tax Act, an Income Tax Assessing Officer is allowed to issue a notice demanding the taxpayer to file an income tax return. The officer can demand the assessee to produce documents pertaining to an income tax assessment. If a taxpayer may fail to comply with a notice from an Income Tax Officer. In such cases, the taxpayer shall be liable for a penalty of Rs.10,000 for each instance of failure to comply. The officer may also require the taxpayer to furnish in writing any information. The taxpayer should get the accounts audited or re-audited by a Chartered Accountant.

Undisclosed income

• 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.
• Where Search has been initiated on/ after 1/7/2012 but before 15/12/2016,
• 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.
• 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.
• In all other cases, penalty is leviable @ 60%

Penalty for Concealing Income

The taxpayer may endeavour to reduce his tax liability by concealing income or by furnishing inaccurate particulars of income. In such cases, a penalty can be levied by the Assessing Officer. Penalty for such contravention shall be 100% to 300% of the tax evaded.

Penalty for Not Maintaining Book of Accounts

The Income-tax Act mentions that a taxpayer is bound by the need to maintain books of account. The taxpayer may fail to maintain books of account. In such cases a penalty of up to Rs.25000 is applicable.

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.