Under the Income Tax Act, 1961, penalties and prosecutions are imposed for various defaults and non-compliance issues. Key penalties include fines for failure to pay self-assessment tax (Section 140A), undisclosed income (Section 158BFA), and late filing of returns (Section 234F). Specific penalties apply to defaults like failure to maintain books of account (Section 271A) and inaccuracies in international transactions (Section 271AA). Penalties also cover failures in tax deductions (Section 271C), loan and deposit regulations (Sections 271D, 271E), and inaccuracies in financial reports (Section 271J). For severe cases, such as non-compliance during searches or obstructing tax recovery, prosecutions can lead to rigorous imprisonment and unlimited fines (Sections 275A, 276). Additionally, provisions for immunity from penalties exist if reasonable cause is proven or an application for settlement under Section 245C is made. The document provides a comprehensive overview of the penalties and legal repercussions under the Act, including detailed sections on each default and corresponding penalties.
PENALTIES & PROSECUTION
[AY 2025-26]
| Section | Nature of default | Penalty leviable |
| (1) | (2) | (3) |
| 140A(3) | Failure to pay wholly or partly— | Such amount as Assessing Officer may impose but not exceeding tax in arrears |
| (a) self-assessment tax, or | ||
| (b) interest and fee, or | ||
| (c) both | ||
| under section 140A(1) | ||
| 158BFA(2) | Determination of undisclosed income of block period | Minimum : 100 per cent of tax leviable in respect of undisclosed income |
| Maximum : 300 per cent of tax leviable in respect of undisclosed income. | ||
| 221(1) | Default in making payment of tax | Such amount as Assessing Officer may impose but not exceeding amount of tax in arrears |
| 234E | Failure to file statement within time prescribed in section 200(3) or in proviso to section 206C(3) | Rs. 200 for every day during which failure continues but not exceeding tax deductible/collectible |
| 234F | Default in furnishing return of income within time prescribed in section 139(1) | Rs. 5,000 if return is furnished after due date specified under section 139(1). However if the total income of the person does not exceed Rs. 5 lakhs then Rs. 1,000 shall be the late filing fees. |
| 234G | Fee for default in submission of statement/certificate prescribed under section 35/ Section 80G | Rs. 200 per day |
| 234H | Fee for default in intimating the Aadhaar Number | a) Rs. 500, if such intimation is made between 01-04-2022 and 30-06-2022; and |
a) A false entry; or
a) Shares or interest in a foreign company or entity derive substantial value, directly or indirectly, from assets located in India; and
b) Such foreign company or entity holds such assets in India through or in such Indian concern.
In this case, the Indian entity shall furnish the prescribed information for the purpose of determination of any income accruing or arising in India under Section 9(1)(i).
a) a sum equal to 2% of value of transaction in respect of which such failure has taken place, if such transaction had effect of, directly or indirectly, transferring right of management or control in relation to the Indian concern;
Note : No penalty is imposable for any failure under sections 271(1)(b), 271A, 271AA, 271B, 271BA, 271BB, 271C, 271CA, 271D, 271E, 271F, 271FA, 271FAB, 271FB, 271G, 271GA, 271GB, 271H, 271-I, 272A(1)(c) or (d), 272A(2), 272AA(1), 272B, 272BB(1), 272BB(1A), 272BBB(1), 273(1)(b), 273(2)(b) and 273(2)(c) if the person or assessee proves that there was reasonable cause for such failure (section 273B).
Section 273AA provides that a person may make application to the Principal Commissioner/Commissioner for granting immunity from penalty, if (a) he has made an application for settlement under section 245C and the proceedings for settlement have abated; and (b) penalty proceeding have been initiated under this Act. The application shall not be made after the imposition of penalty after abatement.
OFFENCES AND PROSECUTIONS
| Section | Nature of default | Punishment (rigorous imprisonment) | Fine |
| (1) | (2) | (3) | (4) |
| 275A | Contravention of order made under section 132(1) (Second Proviso) or 132(3) in case of search and seizure | Up to 2 years | No limit |
| 275B | Failure to afford necessary facility to authorised officer to inspect books of account or other documents as required under section 132(1)(iib) | Up to 2 years | No limit |
| 276 | Removal, concealment, transfer or delivery of property to thwart tax recovery | Up to 2 years | No limit |
| 276A | Failure to comply with provisions of section 178(1) and (3) re : company in liquidation | 6 months to 2 years | — |
| 276B | Failure to pay to credit of Central Government (i) tax deducted at source under Chapter XVII-B (non-cognizable offence under section 279A), or proviso to section 194B, or failure to pay or ensure payment of tax as required by section 115O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2). | 3 months to 7 years | No limit |
| 276BB | Failure to pay the tax collected under the provisions of section 206C | 3 months to 7 years | No limit |
| 276C(1) | Wilful attempt to evade tax, penalty or interest or under-reporting of Income (non-cognizable offence under section 279A)— | ||
| (a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other cases | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit | |
| 276C(2) | Wilful attempt to evade payment of any tax, penalty or interest (non-cognizable offence under section 279A) | 3 months to 3 years (2 years w.e.f. 1-7-2012) | No limit |
| 276CC | Wilful failure to furnish returns of fringe benefits under section 115WD/ 115WH or return of income under section 139(1) or under section 139(8A) or in response to notice under section 142(1)(i) or section 148 or section 153A (non-cognizable offence under section 279A)— | ||
| (a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012) | 6 months to 7 years | No limit | |
| (b) in other cases |
Notes :
1. No person is punishable for any failure under section 276A, 276ABor 276Bif he proves that there was reasonable cause for such failure (vide section 278AA).
2. (a) Prosecution for offences under section 275A, section 275B, section 276, section 276A, section 276B, section 276BB, section 276C, section 276CC, section 276D, section 277, section 277Aand section 278to be instituted with previous sanction of Principal Director General/Principal Chief Commissioner/Principal Commissioner/Director General/Chief Commissioner/Commissioner, except where prosecution is at the instance of the Commissioner (Appeals) or the appropriate authority (vide section 279).
(b) The offences under Chapter XXII can be compounded (either before or after the institution of proceedings) by Principal Director General/Director General or Principal Chief Commissioner/Chief Commissioner.
3. Where an offence under this Act has been committed by a person, being a company, and the punishment for such offence is imprisonment and fine, then, such company shall be punished with fine and every person, referred to in sub-section (1) of section 278B, or the director, manager, secretary or other officer of the company referred to in sub-section (2) of section 278Bshall be liable to be proceeded against and punished in accordance with the provisions of this Act.
4. With effect from 1-4-2008 under section 278ABa person may apply to the Principal Commissioner/Commissioner for granting immunity from prosecution, if he has applied for settlement under section 245Cand the proceedings have abated under section 245HA. The application shall not be made after institution of prosecution proceedings after abatement.
1. With effect from assessment year 2015-16 “annual information return” has been changed to “statement of financial transaction or reportable account” and word “return” has been changed to “statement”.
2. With effect from assessment year 2015-16 a new section 271FAAhas been inserted to provide for a penalty of Rs. 50,000 for furnishing inaccurate statement of financial transaction or reportable account in certain cases.
3. With effect from 1-10-2014 TPO can also levy penalty.
4. Section 271Has amended with effect from 1-10-2014 provides that penalty shall be levied by Assessing Officer.
5. Non-operative with effect from 1-7-2002.
6. With effect from October 1, 2014, if a person wilfully fails to produce accounts and documents as stated or wilfully fails to comply with the direction given, he shall be punishable with rigorous imprisonment for a term which may extend to one year and with fine (quantum of fine has not been specified).
7. No limit w.e.f. 1-10-2014.
[As Amended by Finance Act, 2024]
(Republished with Amendment, Source -Income Tax Website)