Penalties under the Income Tax Act and Various Income Tax Offences

The Income Tax Act of 1961 plays a crucial role in governing taxation in India. To ensure tax compliance and deter tax evasion, the Act includes a comprehensive set of penalties and prosecutions for various defaults and offenses. As taxpayers, it is essential to understand these penalties and their implications to maintain transparency and contribute to the nation’s growth. the penalties applicable during the assessment year 2024-25, exploring different sections of the Act and the consequences of non-compliance.A timely and consistent paying of taxes and filing of returns ensures the government has money for public welfare at any point of time. To make sure that taxpayers do not default in paying taxes or disclosing the information, there are several penalties prescribed under the Act. A penalty or a punishment is imposed on the taxpayers for being non-compliant. Listed below is a summary of some of the important and most common penalties.

INCOME TAX PENALTIES [AY 2024-25]

Offence Under Income Tax Section 158BFA with Penalty

Offence: For the blocked time the computation of the income that is not disclosed, while below section 132 any search is executed or in context to any books of account/any other credentials or the kind of asset can be seized beneath section 132A, towards the case of any individual.

Penalty: For the case of 100% of the tax shall be the min penalty that is to be levied with respect to the unspecified income that is to be increased to the highest of 300% of the tax that is subjected to imposed towards to the unspecified income.

Offence with Penalty Under Income Tax Section 221(1)

Offence: If the taxpayer builds with any default in executing tax payment.

Penalty: The assessing officer shall point the amount of penalty. However, the amount of the penalty does not exceed the arrears of the payment.

Offence Under Income Tax Section 234E with Penalty

Offence: An assessee failed to file the return regards to TDS/TCS within the time specified under Section 200(3) and 206C (3).

Penalty: The penalty beneath this section shall be Rs 200 towards every day of default.

Offence with Penalty Under Income Tax Section 234F

Offence: The taxpayer has made default in furnishing the return that comes beneath section 139(1) in the said limit.

Penalty: If the taxpayer furnished the return prior to the date 31st Dec towards the related assessment year then Rs 5000 shall be the penalty imposed on him while in other cases it shall be Rs 10,000. But if the income of the taxpayer is below Rs 5 lakh then he needs to file the penalty of an amount less than Rs 1000.

Offence and Penalty Under Section 207A

Offence: Under the act, there can be 2 cases i.e if the taxpayer has built an under-report of his income and the other is the taxpayer has addressed an under-report for misreporting of income.

Penalty: Towards the 1st case if the penalty will be 50% of the amount of the subjected tax that is based on the under-reported income. In the other case, 200% shall be the penalty of the amount of the subjected tax that is on the grounds of under-reported income.

Offence Under Section 271(1)(b) with Applicable Penalty

Offence: When the return does not get furnished by the taxpayer to provide an answer on the notice then he will get punished beneath the same section. But this section is subjected to the AY 2016-17.

Penalty: The penalty that comes beneath this section is Rs 10000 for every mistime.

Read Also: Easy Guide to TDS Provisions Under Income Tax Act 1961

Offence Under Income Tax Section 271(1)(c) with Penalty

Offence: Hide the income or advantages or he files the improper particulars of his income or advantages. But this section is subjected up to the assessment year 2016-2017.

Penalty: The minimum penalty beneath this section is 100% of these taxes and is avoided and the highest of it can be 300% upon these tax i.e avoided.

Offence Under Income Tax Section 271(1)(4) with Applicable Penalty

Offence: Income is given through the firm that is enrolled but it is not as per the title of the partnership and due to that the partner returns their income that is less than the real amount. But the same section is liable up to the assessment year 2016-2017.

Penalty: Beneath the section, the penalty is highest of 150% of the tax that is evaded.

Income Tax Section 271A

Offence: Failure to retain or control the documents or books of accounts required beneath section 44AA.

Penalty: This shall influence the penalty of Rs 25,000.

Income Tax Section 271AA (2)

Offence: Folds to provide the details or any documents to the authorisation that is required beneath section 92D (4).

Penalty: It points towards the penalty of Rs 5,00, 000.

INCOME TAX OFFENCES AND PROSECUTIONS [AY 2024-25]

*Sections*	*Offences*	*Penalties*
158BFA	Calculation of concealed income for the block period when a search is commenced under section 132 or for any books of account or any other document or any asset can be seized under section 132A in the case of any individual.	The minimum penalty in the preceding scenario will be 100 percent of the tax leviable on the unreported income, which can be enhanced to a maximum of 300 percent of the tax leviable on the undisclosed income.
221(1)	If the assessee has undertaken some mistake on his or her tax payments.	The assessing officer will determine the amount of the punishment. However, the penalty cannot be greater than the arrears of payment.
234E	An assessee failed to file the TDS/TCS return within the time frames stipulated in Sections 200(3) and 206C. (3).	The penalty under this provision shall be Rs 200 each day of noncompliance.
234F	An assessee failed to file the return required by section 139(1) within the time period specified.	If the assessee files the return before December 31st of the relevant assessment year, the penalty is Rs 5,000. In all other cases, the fee will be Rs 10,000. However, if the assessee’s income is less than Rs 5 lakhs, the penalty should not exceed Rs 1,000.
270A	In this provision, there might be two cases: if an assessee has under-reported his income, and if an assessee has under-reported for income misreporting.	In the first situation, the penalty will be 50% of the amount of tax owed on the unreported income. In the second situation, the penalty will be 200 percent of the amount of tax owed on the unreported income.
271(1)(b)	If an assessee fails to file the return or respond to the notification, he would be punished under this clause. This section, however, only applies to the Assessment Year 2016-2017.	The penalty under this clause shall be Rs 10,000 for each failing.
271(1)(c)	He concealed any details of his income or benefits, or he provided inexact details of his income or benefits. This section, however, only applies to the Assessment Year 2016-2017.	The minimum penalty under this clause is 100 percent of the evaded tax, and the maximum penalty is 300 percent of the avoided tax.
271(1)(4)	Distribution of any money by a registered business that is not in accordance with the partnership agreement, and as a result, the partner returns income that is less than the true amount. This section, however, only applies to the Assessment Year 2016-2017.	The maximum penalty under this clause is 150 percent of the evaded tax.
271A	Failure to retain, maintains, or hangs on to the records or books of accounts required under section 44AA.	This will result in an Rs 25,000 fine.
271AA(2)	Failure to provide the authority with the information or documentation required under section 92D (4).	This will result in a Rs 5,00,000 fine.
271AAA(1)	Where a search was begun under Section 132 between the 1st of June, 2007 and the 1st of July, 2012.	10% of the stated prior year’s hidden income
271AAA(2)	Nothing in subparagraph (1) shall apply.	if the assessee confesses the concealed income and specifies how it was derived, substantiates how the hidden income was derived, and pays the tax, plus interest, if any, on the undisclosed income There will be no penalty imposed under paragraph (c) of sub-section (1) of section 271.
271AAB(1)	Where the search began between July 1st, 2012 and December 15th, 2016	a) At a rate of 10% of the concealed income if: -Assessee admits the undisclosed income as well as the method of obtaining it. -Provides evidence of how concealed income was obtained; -Pays the tax, plus interest, and files the return of income for the given preceding year, disclosing undisclosed income, on or before the stipulated date. b) At a rate of 20% of the hidden income if: -The assessee does not acknowledge the undisclosed income; -The assessee declares the income for the specified preceding year and pays the tax and interest on the undisclosed income on or before the specified date; and c) If not protected by clauses (a) or (b), –60% of the undeclared income from the preceding year.
271AAB(1A)	Where the search began after December 15th, 2016	a) At a rate of 30% of the concealed income if: – Assessee admits the undisclosed income as well as the method of obtaining it. -Provides evidence of how concealed income was obtained; -Pays the tax, plus interest, and files the return of income for the given preceding year, disclosing undisclosed income, on or before the stipulated date. b) At a rate of 60% of the undeclared income if not protected by the requirements of article (a).

FAQs

For which defaults can the Assessing Officer waive off the imposition of penalties when the taxpayer proves reasonable cause for failure of default?

If the taxpayer proves a reasonable cause for failure or making defaults listed in section 273B, the penalty proceedings may be waived off by the Assessing Officer. Some of the examples of defaults listed are:

Failure to keep, retain or maintain books of account, documents, etc., as per section 44AA, deduct TDS/TCS, TDS/TCS return
False estimate or failure to pay advance tax

Can the penalty for misreporting or underreporting of income be waived off?

Yes, under section 270AA, taxpayers can ask the assessing officer to grant immunity from penalty under section 270A after fulfilling the following conditions:

Tax and interest in the assessment order are paid within the time provided in the demand notice
No appeal is made for the assessment order

A proper application for such waive-off has to be made within one month from the end of the month of the order receiving date.

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