8 Must Know Income Tax Penalties In India

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Income tax department has set various fees and penalties depending on the faults. Many individuals and tax payers neglect any notice from the Income Tax Department out of ignorance which can be a costly affair.

Some of the penalties are mandatory and a few are at the discretion of the tax authorities.

Here are some of the penalties you must know:

Penalty for default in making payment of Self Assessment Tax

If a person fails to pay either wholly or partly self assessment tax or interest, then he will be treated as assessee in default in respect of unpaid amount.

If a taxpayer is treated as an assessee in default, then he shall be held liable to pay penalty of such amount as the Assessing Officer may impose and in the case of a continuing default, such further amount or amounts as the assessing officer may, from time to time, direct.

However, the total amount of penalty cannot exceed the amount of tax in arrears.

Penalty for default in making payment of tax

When a demand notice under section 156 has been issued to the taxpayer for payment of tax then such amount shall be paid within a period of 30 days of the service of the notice at the place and to the person mentioned in the notice.

The tax authorities shall give the taxpayer a reasonable opportunity of being heard. No penalty is levied if the taxpayer proves to the satisfaction of the tax authorities that the default was for good and sufficient reason.

Late filing fees for delay in filing the TDS/TCS statement

Every person liable to deduct tax at source is liable to file the statement in respect of tax deducted by him i.e. TDS return.

If a person fails to file the TDS/TCS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues.

Penalty for failure to comply with notice

As per Income tax act, penalty is levied if a taxpayer fails to comply with notice issued to him or fails to comply with a direction issued.

If the taxpayer fails to comply with notice issued to him he shall be liable for a penalty of Rs 10,000 for each failure.

Penalty for underreporting and misreporting of income

Many times a taxpayer may try to reduce his tax liability by underreporting of income.

The rate of penalty shall be fifty per cent of the tax payable on under-reported income.

However, in a case where under-reporting of income results from misreporting of income, the taxpayer shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income.

Penalty for failure to pay tax in respect of winning from lottery or crossword puzzle

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding [ten thousand rupees], shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.

Where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings.

If any person fails to pay whole or part of the tax as required under second proviso to section 194B than, such person shall be liable to pay penalty of an amount equal to tax not paid, as per section 271C.

Failure to furnish statement Annual Information Return

Non-furnishing of statement of financial transaction or reportable account will attract penalty under section 271FA. Penalty shall be levied of Rs 100 per day of default.

Failure to co-operate with the tax authorities

Many times the tax authorities requires any information from a person, in such a case, the tax authorities may request such person to answer questions raised by them or may [As amended by Finance Act, 2016] require the person to sign the statements or may issue him a summon for his attendance.

Read more about: income tax
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