In this article, Shristi Borthakur, of Symbiosis Law School, NOIDA, discusses the most common income tax penalties in India.

As per the Union List in the Constitution of India, the Central Government has the power to levy a tax on any income other than agricultural income, which is defined in Section 10(1) of the Income Tax Act, 1961, which is the charging statute of income tax in India. Income tax is the annual tax levies on the income of businesses and individuals, wherein businessmen and other individuals are required to file their income returns to the central government every year to determine the amount of tax they owe to the government. It is the key source of funding available to the government. As per the Income Tax laws in India, income tax is imposed by the government on,

• Individuals
• Hindu United Families (HUF)
• Companies and firms
• Limited Liability Partnership (LLP)
• Association of persons, a body of individuals
• Local authority and any other artificial juridical person

This is imposed on both earned and unearned income, and can be in the form of direct tax, paid directly to the government on your income, and indirect tax, that is charged by various service providers, such as GST. Furthermore, this is applicable to anyone who earns income in India, thus, even to NRIs. The Income Tax Department has classified income into 5 categories, which are as follows,

1. Income from salary- wages, pensions, commissions, etc.
2. Income from other sources-savings bank account interest, fixed deposits, prize money, if any, etc.
3. Income from house property- from rents
4. Income from capital gains- shares, mutual funds, etc.
5. Income from a business- income from self-employed areas.

To calculate the amount of income tax particular business/ individual owes, the above categories are further categories into tax slabs based on their income range. These tax slabs, however, are not fixed and are subject to exemptions and deductions. The tax slabs for the year 2017-18 are as follows,

The taxpayer is supposed to file his income tax return, which is a statement of earning from various sources, before the specified date for each year, that determine the following,

• Whether the taxpayer owe tax in the first place,
• What is the amount of tax the taxpayer owes
• Is he/she eligible for any tax refund

Non-payment of income tax is a punishable offence, and various penalties accrue for various kinds of default by taxpayers. The Income Tax Act lays down the various tax defaults, and the penalty that they attract, as amended by the Finance Act, 2017. Also, not all penalties are mandatory, and some are at the behest of the discretion of the tax authorities.

Explore this comprehensive list of most common Income Tax penalties

Default	Relevant Sections of the Act	Meaning	Penalty
Default in Self Assessment Tax	S.140A(1) S. 221(1)	It is the tax that is to be paid before filing income tax return that is due after allowing credit for Tax Deducted at Source (TDS), advance tax, etc. along with interest and fee.	As much amount as may be imposed by the Assessing Officer, after reasonable opportunity to be heard has been given. The penalty cannot exceed the amount of tax in arrears.
Default in making payment of tax	S. 221(1)	Tax becomes payable within 30 days of service of tax demand notice	-same as above-
Late filing of TDS/TCS Return	S. 200(3) S. 206C(3) S. 234E	every person liable to deduct tax at source is liable to file the statement in respect of tax deducted by him (TDS) every person liable to collect tax at source has to furnish a statement in respect of tax collected by him (TCS)	Failure to file TDS/TCS on or before the due date will attract levy of Rs. 200/- per day until the time of failure continues, not exceeding the amount of TDS/TCS.
Failure to comply with Income Tax notice	S. 141(1) S. 143(2) S.142(2A) S. 272A	Notice may be served to the taxpayer to File income tax return Produce documents relating to income tax assessment Furnish in writing any other information Audit or re-audit of account Notice produced before scrutiny assessment	Shall be liable for a penalty of Rs. 10,000 for each failure
Concealing income or furnishing wrong details	S. 270A	It is the duty of the taxpayer to furnish the correct details of his income on his tax returns. Underreporting or misreporting will be a default under the provisions of the Act.	50% of tax payable on under-reported income; 200% of tax payable on misreported income
Non-maintenance of book of accounts	S. 44A S. 271A	A taxpayer is required to duly maintain a book of accounts, documents, etc. under the provisions of the Act	Liable for a penalty of Rs. 25,000
Non-maintenance of book of international transactions or specified domestic transactions	S. 92D S. 271AA	Every person entering into an international transaction or specified domestic transaction shall keep and maintain such information and documents as may be prescribed in this regard under rule 10D. The taxpayer should furnish such accounts within 30 days, on demand by the Income Tax authority	Penalty will be a sum equal to 2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.
Undisclosed income found in Income Tax search	S. 132 S. 271 AAB	Income tax authorities can conduct a search of the premises of a taxpayer to unearth undisclosed income. If a search is initiated by the income tax department and undisclosed income is unearthed in the search, then penalty can be levied.	10% of the undisclosed income of the specified previous year if taxpayer admits the undisclosed income, substantiates the manner in which such income 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 year declaring such undisclosed income. 20% of the undisclosed income of the specified previous year if the taxpayer does not admit the undisclosed income, but on or before the specified date declares such income in the return of income furnished for the specified previous year and pays the tax, together with interest thereon. Minimum 30% and maximum 90% of the undisclosed income of the specified previous year, if it is not covered by (1) or (2) above.
Undisclosed sources	S.68-69-A,B,C,D S. 115BBE	The AO can make addition to the income if the taxpayer fails to explain the nature and source of his income	Penalty at the rate of 10% of tax payable
Failure to get accounts audited	S. 44AB S. 271B	The guidelines are laid down in the Act relating to when a taxpayer is supposed to get his accounts audited, and also furnish a report from a CA of the same	Liable for a penalty of Rs. 1,00,000
Failure to deduct tax at source (OR) failure of company to pay Dividend Distribution Tax	chapter XVII-B S. 271C S. 115-O	Penalty accrues if a person requires deducting tax at source, fails to pay partly or wholly	Penalty shall be levied of an amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax).
Failure to pay tax on winning of a lottery, game, etc.	S. 194B S. 271C	Any person responsible for making payment to a person winning a lottery or crossword puzzle or card game or any other game for an amount exceeding Rs.10,000 is responsible for deducting income tax while making payment of the winning amount	Liable to pay penalty of an amount equal to tax not paid
Failure to collect tax at source	S. 206C S. 271CA	The Act provides that certain items in respect of which tax is to be collected at source by the person receiving payment in respect of certain specified items	Penalty shall be levied of an amount equal to tax not collected
Accepting loans and deposits in cash	S. 269SS S. 271D	No person shall take or accept a loan or deposit a specified sum exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft or use of electricity clearing system through a bank account	Penalty shall be levied of an amount equal to loan or deposit taken or accepted.
Receipt of an amount of Rs. 2 lakh or more in cash	S. 269ST S. 271DA	-same as above- However, not applicable to Government, any banking company, post office savings bank, co-operative bank or a person notified by the Central Government.	The penalty shall be equal to the amount of such receipt. However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention.
Repayment of certain loans or deposits in cash	S. 269T S. 271E	No person shall repay any loan or deposit a specified advance exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft in the name of the person who has made the loan or deposit or paid the specified advance or by use of electricity clearing system through a bank account.	Penalty shall be a sum equal to loan or deposit a specified advance so repaid
Not Filing Statement of Financial Transaction or Annual Information Return (AIR)	S. 285BA(5) S. 271FA	The Act empowers the tax authorities to issue a notice to the person directing him to file the statement within a period not exceeding 30 days from the date of service of such notice and in such a case person shall furnish the statement within the time specified in the notice.	Penalty shall be levied of Rs. 100 per day of default. If a person fails to file the statement within the specified time, then a penalty of Rs. 500 per day shall be levied from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.
Filing inaccurate statement of financial transaction	S. 271FAA S. 285BA	As per the provisions of the Act, a financial institution is required to furnish accurate information on referral to furnish a statement of financial transactions	The income tax authority may levy a penalty of up to Rs.50,00.
Penalty for failure to file the TDS/TCS return	S. 271H	Any person required to file TDS/TCS should file TDS/TCS return on or before the due date prescribed	Minimum penalty shall be levied of Rs. 10,000 which can go up to Rs. 1,00,000. The penalty under section 271H will be in addition to late filing fee prescribed under section 234E.
Failure to cooperate with tax authorities	S.272A(1)	It is required upon the taxpayer to duly answer questions, sign statements, furnish details and comply to orders, notices and directions, attend office to produce evidence, etc. as and when mandated by the tax authorities.	Penalty leviable is Rs. 10,000 for each failure/default.
Failure to comply with provisions relating to PAN	S. 139A S. 272B	The provisions relating to PAN provided guidelines for obtaining, quoting and forms of intimation regarding PAN	Penalty of such non-compliance is Rs. 10,000
Failure to comply with provisions relating to Tax Deduction Account Number (TAN)/ Tax Collection Number	S. 203A S. 272BB	Every person deducting tax at source or collecting tax at source has to obtain the Tax Deduction Account Number or Tax Collection Account Number	Penalty for failure to obtain such numbers or quoting incorrect details regarding the same is Rs. 10,000

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