The Income Tax Act includes various penalty provisions for non-compliance. Under Section 221, penalties are imposed for defaults in tax payment, with amounts up to the tax in arrears. Section 270A penalizes under-reporting and misreporting of income, with penalties ranging from 50% to 200% of the tax payable. Section 271A covers penalties for failure to maintain required books of accounts, set at Rs. 25,000. Section 271AA and 271AAA deal with penalties for non-compliance related to international transactions and undisclosed income, respectively, ranging from 2% to 100% of the transaction value or undisclosed income. Sections 271AAB and 271AAC focus on penalties related to undisclosed income, with varying rates depending on the timing of the search. Sections 271B and 271BA impose penalties for failure to audit accounts and report international transactions. Other sections, such as 271C, 271CA, and 271D, address penalties for failures in tax deduction, collection, and cash transactions. Sections 271FA and 271FAA relate to penalties for failing to report financial transactions accurately. The Act also includes penalties under Sections 271FAB, 271G, and 271GA for non-compliance with specific reporting requirements. These penalties aim to ensure adherence to tax regulations and accurate reporting.
FAQs on Penalty provision under IT Act
Q1. When penalty under Section 221 shall be imposed?
Ans: Penalty under Section 221 shall be imposed if an assessee is in default or is deemed to be in default in payment of tax.
Q2. What is the amount of penalty levied under section 221?
Ans: Such amount as the Assessing Officer may impose subject to a maximum limit of tax in arrears
Q3. When penalty under Section 270A may be imposed?
Ans: Penalty under Section 270A may be imposed for under-reporting and misreporting of income (not being an unexplained income).
Q4. What is under-reporting of income?
Ans:
| Cases | Income assessed under normal Provisions | Income assessed under MAT/AMT Provisions |
| Return of Income is filed | Income assessed is greater than the income determined in the return processed u/s 143(1)(a) | The deemed total income assessed or reassessed as per the provisions of section 115JB/115JC, is greater than the deemed total income determined in the return processed under section 143(1)(a) |
| No Return of Income is filed or return is filed for the first time under section 148 | The income assessed is greater than the maximum exemption limit | The deemed total income assessed as per the provisions of section 115JB/115JC, is greater than the maximum exemption limit. |
| Case of Reassessment | The income reassessed is greater than the income assessed or reassessed immediately before such reassessment | The deemed total income reassessed as per the provisions of section 115JB/115JC, is greater than the deemed total income assessed or reassessed immediately before such reassessment. |
| Loss Assessed | The income assessed or reassessed has the effect of reducing the loss or converting such loss into income | The income assessed or reassessed has the effect of reducing the loss or converting such loss into income. |
Q5. What is misreporting of income?
Ans: The following cases will be considered as misreporting of income:
a. Misrepresentation or suppression of facts;
b. Failure to record investments in the books of account;
c. Claim of expenditure not substantiated by any evidence;
d. Recording of any false entry in the books of account;
e. Failure to record any receipt in books of account having a bearing on total income; and
f. Failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.
Q6. What is the amount of penalty levied under section 270A?
Ans: The penalty shall be a sum equal to 50% of the amount of tax payable on under-reported income.
However, if under-reported income is in consequence of any misreporting thereof by any person, the penalty shall be equal to 200% of the amount of tax payable on under-reported income.
Q7. When penalty under Section 271A may be imposed?
Ans: Penalty under Section 271A may be imposed if any person fails to keep and maintain any books of account and other documents as required under Section 44AA. Further, the penalty may also be imposed on failure to retain such books of accounts and other documents for 6 years.
Q8. What is the amount of penalty levied under section 271A?
Ans: Rs. 25,000
Q9. When penalty under Section 271AA may be imposed?
Ans: Penalty under Section 271AA may be imposed if any of the following defaults are committed by the assessee:
a. Failure to keep and maintain information and documents, as referred under Section 92D, in respect of an international transaction or specified domestic transaction entered by it;
b. Failure to report the international transaction or specified domestic transaction which he is required to do so;
c. Maintaining or furnishing incorrect information or document in respect of an international transaction or specified domestic transaction.
Q10. What is the amount of penalty levied under section 271AA?
Ans: The penalty shall be a sum equal to 2% of the value of each international transaction or specified domestic transaction entered into by the taxpayer.
However, if a constituent entity of an international group fails to furnish information and documents as required under Section 92D(4), the Director-General of Income-tax (Risk Assessment) may impose a penalty of Rs 500,000.
Q11. When penalty under Section 271AAA shall be imposed?
Ans: Penalty under Section 271AAA shall be imposed where a search has been initiated before 1-7-2012 and undisclosed income found.
Q12. What is the amount of penalty levied under section 271AAA?
Ans: 10% of undisclosed income
Q13. When penalty under Section 271AAB(1) may be imposed?
Ans: Penalty under Section 271AAB(1) may be imposed where a search has been initiated on or after 1-7-2012 but before 15-12-2016 and undisclosed income found.
Q14. What is the amount of penalty levied under section 271AAB(1)?
a. 10% of undisclosed income of the specified previous year if assessee admits the undisclosed income; substantiates the manner in which it 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 previous year declaring such undisclosed income
b. 20% of undisclosed income of the specified previous year if assessee does not admit the undisclosed income, and on or before the specified date declare such income in the return of income furnished for the specified previous year and pays the tax, together with interest thereon;
c. 60% of undisclosed income of the specified previous year if it is not covered by (a) or (b) above.
Q15. When penalty under Section 271AAB(1A) may be imposed?
Ans: Penalty under Section 271AAB(1A) may be imposed where a search has been initiated on or after 15-12-2016 and undisclosed income found.
Q16. What is the amount of penalty levied under section 271AAB(1A)?
Ans: a. 30% of undisclosed income of the specified previous year if assessee admits the undisclosed income; substantiates the manner in which it 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 previous year declaring such undisclosed income
b. 60% of undisclosed income of the specified previous year in any other case.
Q17. When penalty under Section 271AAC may be imposed?
Ans: Penalty under Section 271AAC may be imposed where income determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C, or section 69D for any previous year. [if such income is not included by the assessee in his return or tax in accordance with section 115BBE has not been paid].
Q18. What is the amount of penalty levied under section 271AAC?
Ans: 10% of tax payable under section 115BBE
Q19. When penalty under Section 271AAD may be imposed?
Ans: Penalty under Section 271AAD may be imposed if, during any proceedings under this Act, it is found that in the books of account maintained by any person there is:
a. A false entry in the books of accounts; or
b. An omission of any entry, which is relevant for computation of total income, to evade tax liability.
Q20. What is the amount of penalty levied under section 271AAD?
Ans: 100% of such false entries or omitted entry
Q21. When penalty under Section 271AAE may be imposed?
Ans: Penalty under Section 271AAE may be imposed for violation of the provisions of 21st proviso to section 10(23C) or section 13(1)(c) pertaining to passing of unreasonable benefits to trustees or specified person.
Q22. What is the amount of penalty levied under section 271AAE?
Ans: a. For the first violation: To the extent of income applied by the institution for the benefit of any interested person referred to in section 13(3);
b. For any violation in subsequent years: Twice the amount of such income so applied.
Q23. When penalty under Section 271B may be imposed?
Ans: Penalty under Section 271B may be imposed if a person fails to get his accounts audited or fails to furnish a report of audit under Section 44AB in Form 3CA and Form 3CB or Form 3CD, as the case may be, by the due date.
Q24. What is the amount of penalty levied under section 271B?
Ans: The penalty shall be 0.5% of total sales, turnover, or gross receipts (as the case may be) or Rs. 150,000, whichever is less.
Q25. When penalty under Section 271BA shall be imposed?
Ans: Penalty under Section 271BA shall be imposed if a person, who has entered into an international transaction or specified domestic transaction, fails to furnish a report from a Chartered Accountant in the Form 3CEB on or before the due date.
Q26. What is the amount of penalty levied under section 271BA?
Ans: Rs. 1,00,000
Q27. When penalty under Section 271BB may be imposed?
Ans: Penalty under Section 271BB may be imposed for failure to subscribe any amount to units issued under scheme referred to in section 88A(1).
Q28. What is the amount of penalty levied under section 271BB?
Ans: 20% of such amount
Q29. When penalty under Section 271C shall be imposed?
Ans: Penalty under Section 271C shall be imposed for the following defaults:
a. Failure to deduct tax at source, whole or part thereof;
b. Failure to pay dividend distribution tax;
c. Failure to pay or ensure payment of tax in respect of the winnings in kind, whether wholly or partly, where cash part is not sufficient to meet the liability for deduction of tax in respect of whole winnings as referred to in Section 194B;
d. Failure to ensure payment of tax in respect of the winnings from online game in kind, whether wholly or partly, where cash part is not sufficient to meet the liability for deduction of tax in respect of whole winnings from online games as referred to in Section 194BA;
e. Failure to ensure payment of tax in respect of the benefit or perquisite in kind, whether wholly or partly, where cash part is not sufficient to meet the liability for deduction of tax in respect of whole of such benefit or perquisite as referred to in Section 194R;
f. Failure to ensure payment of tax in respect of the consideration for transfer of virtual digital asset (VDA) in kind, whether wholly or partly, where cash part is not sufficient to meet the liability for deduction of tax in respect of such consideration for the transfer of VDA as referred to in Section 194S.
Q30. What is the amount of penalty levied under section 271C?
Ans: The penalty shall be a sum equal to the amount of tax which such person has failed to deduct or pay.
Q31. When penalty under Section 271CA shall be imposed?
Ans: Penalty under Section 271CA shall be imposed if a person fails to collect the whole or any part of tax which is required to be collected in accordance with Section 206C.
Q32. What is the amount of penalty levied under section 271CA?
Ans: The penalty shall be a sum equal to the amount of tax which such person has failed to collect.
Q33. When penalty under Section 271D shall be imposed?
Ans: Penalty under Section 271D shall be imposed if a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention to Section 269SS. “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.
Q34. What is the amount of penalty levied under section 271D?
Ans: The penalty shall be a sum equal to the amount of loan or deposit (or specified sum) so taken or accepted.
Q35. When penalty under Section 271DA shall be imposed?
Ans: Penalty under Section 271DA shall be imposed if a person receives Rs. 200,000 or more from a person in cash or in a mode in contravention to Section 269ST.
Q36. What is the amount of penalty levied under section 271DA?
Ans: The penalty shall be a sum equal to the amount of such receipt.
Q37. When penalty under Section 271DB shall be imposed?
Ans: Penalty under Section 271DB shall be imposed if a person, carrying on a business, having total sales, turnover or gross receipts in excess of Rs. 50 crores during the immediately preceding previous year, fails to provide the facility for accepting payment through prescribed electronic modes as referred to in Section 269SU.
Q38. What is the amount of penalty levied under section 271DB?
Ans: Rs. 5,000 rupees for every day of default
Q39. When penalty under Section 271E shall be imposed?
Ans: Penalty under Section 271E shall be imposed if any person repay any loan or the deposit (including interest) or specified advance in cash or in a mode in contravention to Section 269T.
“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to a transfer of immovable property, whether or not the transfer takes place.
Q40. What is the amount of penalty levied under section 271E?
Ans: The penalty shall be a sum equal to loan or deposit or specified advance so repaid.
Q41. When penalty under Section 271FA may be imposed?
Ans: Penalty under Section 271FA may be imposed if a person fails to furnish a Statement of Financial Transaction or Reportable Account under Section 285BA on or before the specified due date.
Q42. What is the amount of penalty levied under section 271FA?
Ans: Rs. 500 per day of default
Further, if a person fails to furnish such statement within the due date, the tax authorities may issue a notice to such person directing him to file the statement within a period not exceeding 30 days from the date of service of such notice. In case such person fails to file the statement within the time specified in the notice, then a penalty of Rs. 1,000 per day shall be levied from the day immediately following the day on which the time specified in the notice expires.
Q43. When penalty under Section 271FAA may be imposed?
Ans: Penalty under Section 271FAA may be imposed if any person provides inaccurate information in the Statement of Financial Transaction or Reportable Account under Section 285BA. The penalty may be levied if:
a. The inaccuracy is due to a failure to comply with the due diligence or is deliberate on the part of that person;
b. The inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts;
c. The person knows the inaccuracy at the time of furnishing the statement but does not inform the tax authorities; or
d. The person discovers the inaccuracy after furnishing the statement but he fails to inform and furnish correct information within 10 days.
Q44. What is the amount of penalty levied under section 271FAA?
Ans: Rs. 50,000
Further, an additional penalty of Rs. 5,000 per reportable account is imposed on the reporting financial institutions if there is any inaccuracy in statement of reportable account and such inaccuracy is due to false or inaccurate information submitted by the holder of reportable accounts.
Q45. When penalty under Section 271FAB may be imposed?
Ans: Penalty under Section 271FAB may be imposed if an eligible investment fund fails to furnish a statement in Form 3CEK, containing information relating to the fulfilment of the conditions as referred to under Section 9A or any other information or document, within the prescribed time limit.
Q46. What is the amount of penalty levied under section 271FAB?
Ans: Rs. 5,00,000
Q47. When penalty under Section 271G may be imposed?
Ans: Penalty under Section 271G may be imposed if a person, who has entered into an international transaction or specified domestic transaction, fails to furnish any information or document as required by the Assessing Officer or Commissioner (Appeals) in the course of proceedings as referred to in Section 92D.
Q48. What is the amount of penalty levied under section 271G?
Ans: The penalty shall be a sum equal to 2% of the value of the international transaction or specified domestic transaction for each such failure.
Q49. When penalty under Section 271GA may be imposed?
Ans: Section 285A provides for reporting by an Indian concern if following two conditions are satisfied:
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.
Ans: 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).
In case of any failure, the Indian concern shall be liable to pay a penalty under section 271GA.
Q50. What is the amount of penalty levied under section 271GA?
Ans: a. 2% of the value of the transaction in respect of which such failure has taken place, if such transaction had the effect of transferring the right of management or control in relation to the India concern, whether directly or indirectly;
b. a sum of Rs. 5,00,000 in any other case.
Q51. When penalty under Section 271GB(1) may be imposed?
Ans: Section 286 of the Income-tax Act requires a parent entity resident in India or an alternate reporting entity resident in India to furnish a ‘Country by Country Report’ (CbCR) in respect of the international group of which it is a constituent in Form 3CEAD. The penalty under section 271GB(1) may be imposed if a reporting entity fails to furnish a report in Form No. 3CEAD.
Q51. What is the amount of penalty levied under section 271GB(1)?
Ans: a. Where the period of failure does not exceed 1 month, Rs. 5,000 for every day for which the failure continues;
b. Where the period of failure exceeds 1 month, Rs. 15,000 for every day for which the failure continues; and
c. Where the failure continues after service of the order to pay penalty, Rs. 50,000 for every day beginning from the date of service of such order.
Q52. When penalty under Section 271GB(2) may be imposed?
Ans: Penalty under Section 271GB(2) may be imposed if a reporting entity fails to produce the information or documents, as required by the Director-General of Income-tax, within the period allowed for it.
Q53. What is the amount of penalty levied under section 271GB(2)?
Ans: a. Rs. 5,000 for every day during which the failure continues. The penalty shall be levied from the day immediately following the day on which the period allowed for it expires; and
b. If the failure continues after service of an order to pay penalty, Rs. 50,000 for every day beginning from the date of service of such order.
Q54. When penalty under Section 271GB(4) may be imposed?
Ans: Penalty under Section 271GB(4) may be imposed if a reporting entity provides inaccurate information in the report furnished and:
a. The entity has knowledge of the inaccuracy at the time of furnishing the report but fails to inform the Director-General of Income-tax;
b. The entity discovers the inaccuracy after the report is furnished but fails to inform the Director-General and fails to furnish a correct report within 15 days of such discovery; or.
c. The entity furnishes inaccurate information or document in response to the notice issued.
Q55. What is the amount of penalty levied under section 271GB(4)?
Ans: Rs. 5,00,000
Q56. When penalty under Section 271H may be imposed?
Ans: Penalty under Section 271H may be imposed if a person fails to furnish the TDS Statement or TCS Statement on or before the due dates or furnishes inaccurate information in such Statements.
Q57. What is the amount of penalty levied under section 271H?
Ans: Penalty shall not be less than Rs. 10,000 but may extend to Rs. 1,00,000.
Q58. When penalty under Section 271-I may be imposed?
Ans: Penalty under Section 271-I may be imposed if a person, responsible for paying to a non-resident, fails to furnish information in Form 15CA or Form 15CB or Form 15CC, as the case may be, or furnishes inaccurate information.
Q59. What is the amount of penalty levied under section 271-I?
Ans: Rs. 1,00,000
Q60. When penalty under Section 271J may be imposed?
Ans: Penalty under Section 271J may be imposed if a Chartered Accountant, a Merchant Banker or a registered valuer furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder.
Q61. What is the amount of penalty levied under section 271J?
Ans: Rs. 10,000 for each incorrect report or certificate
Q62. When penalty under Section 271K may be imposed?
Ans: Penalty under Section 271K may be imposed on failure to deliver a statement of donation or on failure to furnish a certificate of donation by the following institutions:
a. A research association, university, college or other institutions as referred to in Section 35(1)(ii) or Section 35(1)(iii);
b. A company referred to in Section 35(1)(iia); or
c. Any institution or fund referred to in Section 80G.
Q63. What is the amount of penalty levied under section 271K?
Ans: Penalty shall not be less than Rs. 10,000 but may extend to Rs. 1,00,000.
Q64. When penalty under Section 272A(1) shall be imposed?
Ans: Any person who commits any of the following defaults is liable to pay a penalty under section 272A(1):
a. Refusal to answer a question put to a person (who is legally bound to state the truth of any matter relating to his assessment) by an income-tax authority;
b. Refusal to sign any statement made by him in the course of any proceedings under this Act;
c. Failure to comply with summons issued under Section 131(1) to attend the office to give evidence and produce books of account or other documents;
d. Failure to comply with a notice under Section 142(1) for enquiry before an assessment or Section 143(2) for scrutiny assessment;
e. Failure to comply with the direction issued under Section 142(2A) for special audit.
Q65. What is the amount of penalty levied under section 272A(1)?
Ans: Rs. 10,000 for each failure/default
Q66. When penalty under Section 272A(2) shall be imposed?
Ans: Any person who commits any of the following defaults is liable to pay a penalty under section 272A(2):
| Section | Description |
| 94(6) | Failure to furnish information within the prescribed time-limit by any person in respect of shares or securities held by him |
| 176(3) | Failure to give notice of discontinuance of business or profession within 15 days |
| 133 | Failure to furnish information required by the Assessing Officer |
| 134 | Failure to allow inspection of register or any entry in such register or failure to allow copies of such register or any entries therein to be taken |
| 139(4A) | Failure to furnish the return of a charitable trust within the prescribed time-limit |
| 139(4C) | Failure to furnish the return of other institutions within the prescribed time-limit |
| 192(2C) | Failure to furnish a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided by an employer to his employees |
| 197A | Failure to deliver in due time a copy of the declaration furnished for nil deduction of tax |
| 203 | Failure to issue a TDS Certificate |
| 206A | Failure to deliver the quarterly statement by a banking company or a co-operative society or a specified public company |
| 206C | Failure to issue a TCS Certificate |
| 206C(1A) | Failure to furnish a copy of the declaration by the buyer of forest produce or alcoholic liquor in due time to the effect that no tax to be collected |
| 226(2) | Failure to deduct tax at source from salary income as directed by the Tax Recovery Officer |
| 285B | Failure to furnish statement within the prescribed time by any person carrying on the production of a cinematograph films or engaged in any specified activity, or both, showing payments exceeding Rs 50,000 made by him or due from him to any person engaged by him in such production or specified activity |
Q67. What is the amount of penalty levied under section 272A(2)?
Ans: Rs. 500 for every day during which failure continues.
However, the maximum penalty under this provision shall not exceed the amount of tax-deductible or collectible, as the case may be, for failure in relation to a declaration mentioned in Section 197A or TDS/TCS certificate.
Q68. When penalty under Section 272AA shall be imposed?
Ans: The Income-tax authorities are empowered under Section 133B to enter the place of business of the taxpayer to collect information which may be useful under the Act. The information required to be furnished shall be furnished in Form 45D. If a person fails to furnish such information, a penalty shall be imposed on him under section 272AA.
Q69. What is the amount of penalty levied under section 272AA?
Ans: Not exceeding Rs. 1,000
Q70. When penalty under Section 272B may be imposed?
Ans: Penalty under Section 272B may be imposed for the following defaults:
a. Failure to apply for Permanent Account Number (PAN), if it is required to be applied;
b. Failure to quote PAN or Aadhaar in returns, challans etc.;
c. Failure to intimate PAN or Aadhaar to the person responsible for deduction or collection of tax;
d. Quoting or intimating a PAN or Aadhaar which is false or and which he either knows or believes to be false or does not believe to be true;
e. Failure to quote PAN or Aadhaar in documents pertaining to financial transactions as prescribed under Rule 114B;
f. Failure to authenticate PAN or Aadhaar;
g. Obtaining multiple PAN.
Q71. What is the amount of penalty levied under section 272B?
Ans: Rs. 10,000 for each default
Q72. When penalty under Section 272BB may be imposed?
Ans: Penalty under Section 272BB may be imposed in the following circumstances:
a. If a person, responsible for deduction or collection of tax at source, fails to apply for Tax Deduction and Collection Account Number (TAN);
b. If a person fails to quote TAN on the documents on which it is required to be quoted; or
c. If a person quotes a TAN which is false, and which he either knows or believes to be false or does not believe to be true.
Q73. What is the amount of penalty levied under section 272BB?
Ans: Rs. 10,000
