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5 Common Tax Penalties In India

By Staff

Most people feel that giving away a part of your hard-earned money to the government is not fair, but it adds to the development of the country. The money collected in form of tax by the government is used in various public benefit projects and ultimately adds to the development of the whole nation.

Now, many can say that there are other ways of acquiring this amount. But, in reality, tax is the major source of income the government has and when people tamper with their tax calculations or don't pay tax, they are reducing government income. Needless to say, this decreases the overall financial health of the country.


Here are 5 common tax penalties for people who fail to pay their taxes:

1) Delay in Tax Payment

Every person with a taxable income is liable to pay tax, and this tax is to be paid within given timeline as directed by tax department of India. If you fail to pay the due tax amount in full before the end date, the assessing officer has the freedom to levy fine as per his or her inspection. However, this fine does not increase the amount of tax in arrears.

2) Delay in Tax Return Filing

Last date for completing tax return process is usually 31st July, and if a person fails to file tax return on time, he or she has to pay the fine. This fine is Rs 5,000 if the tax return is filed before or on 31 December of the same year. Otherwise, the fine amount is INR 10,000 for every other scenario.

5 Common Tax Penalties In India

In fact, if a person wilfully provides wrong information in the tax return, he or she can face imprisonment. The imprisonment time is minimum 6 months and can reach up to 7 years, which depends on the amount of tax evasion.


3) Income from Non-Disclosed Sources

Everybody knows that it is mandatory by law to disclose every income source that a person holds. If any person is found guilty of not disclosing all the income sources at any time, then the assessing officer can impose a penalty, which will be calculated at 10% of payable tax.

The amount of penalty in this case can be huge. Additionally, the assessing officer also has the power to impose penalty on unexplained investments, money, or any other source of income that is not clearly explained or authorised.

4) Receipt of Cash Higher than Rs 2 Lakh

Many people are already aware of the new Section 269ST instated after demonetization. It says that a person cannot receive any sum of cash amount more than INR 2 lakh from any third party in one day, or due to any single transaction, or due to transactions occurring from any event or occasion. If anybody does that, then the assessing officer can impose fine which can also be equal to the amount received in cash.

5) Wilful Tax Evasion

Tax evasion roughly means underreporting your income or misreporting the income amount in some or the other way. If a person is caught doing tax evasion, he or she can face imprisonment.

If we look at Section 270A of Income Tax Act, then it imposes fine of 50% of the amount payable in tax in case of underreported income. In case of income misreporting, the tax payable is increased to 200% of the amount of tax payable. Further, tax evasion is punishable under Section 276C which can even lead to imprisonment.


There are various other ways in which many people avoid paying tax, and penalties are imposed for these accordingly. However, it is always suggested to pay your tax on time and in full amount to avoid penalties and related circumstances.

Read more about: income tax
Story first published: Saturday, June 9, 2018, 8:30 [IST]
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