11. Penalty for failure to deduct tax at source, wholly or partly or failure to pay wholly or partly tax under section 115-O(2)
If a person who is required to deduct tax at source as required by or under the provisions of chapter XVII-B fails to deduct the tax, then he can be held liable to pay penalty under section 271C.
Section 115-O provides that a company has to pay dividend distribution tax on the dividends distributed by it. If the company fails to pay the dividend distribution tax, then it can be held liable to pay penalty under section 271C.
Penalty under section 271C shall be levied of an amount equal to tax not deducted (in case of TDS) or tax not paid (in case of dividend distribution tax).
12. Penalty for failure to pay tax in respect of winning from lottery or crossword puzzle
The section 194B provides that 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 Rs.10,000 [ten thousand rupees], shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.
Second proviso to section 194B provides that in a case 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, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect 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.
13. Penalty for failure to collect tax at source
Similar to the provisions of tax deducted at source, section 206C provides certain items in respect of which tax is to be collected at source by the person receiving payment in respect of certain specified items. If the person required to collect tax at source fails to collect the tax, then he shall be liable to pay penalty under section 271CA. Penalty shall be levied of an amount equal to tax not collected.
14. Penalty for Taking or accepting certain loans or deposits or specified sum in contravention of provisions of section 269SS
Section 269SS provides that no person shall take or accept loan or deposit or specified sum exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft or use of electricity clearing system through a bank account.
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.
Contravention of the provisions of section 269SS will attract penalty under section 271D. Penalty under section 271D shall be levied of an amount equal to loan or deposit taken or accepted.
15. Penalty for Repaying loans or deposits or specified advance in contravention of provisions of section 269T
Section 269T provides that no person shall repay any loan or deposit or specified Advance exceeding Rs. 20,000 by any mode other than account payee cheque or account payee demand draft in the name of the person who has made the loan or deposit or paid the specified advance or by use of electricity clearing system through a bank account.
“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not transfer
Contravention of the provisions of section 269T will attract penalty under section 271E. Penalty under section 271E shall be a sum equal to loan or deposit or specified advance so repaid.
16. Penalty for Failure to furnish statement of financial transaction or reportable account (previously called as ‘Annual Information Return (AIR)’) as required under section 285BA(1)
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.
However, section 285BA(5) empower the tax authorities to issue a notice to the person directing him to file the statement within a period not exceeding 30 days from the date of service of such notice and in such a case person shall furnish the statement within the time specified in the notice. If person fails to file the statement within the specified time, then a penalty of Rs. 500 per day shall be levied from the day immediately following the day on which the time specified in such notice for furnishing the statement expires.
17. Penalty for furnishing inaccurate statement of financial transaction or reportable account
As per section 271FAA, if a prescribed reporting financial institution referred to in Section 285BA(1)(k) who is required to furnish statement of financial transaction or reportable account, provides inaccurate information in the statement, and where:
(a) the inaccuracy is due to a failure to comply with the due diligence requirement prescribed* under section 285BA(7) or is deliberate on the part of that person;
(b) the person knows of the inaccuracy at the time of furnishing the statement but does not inform the prescribed income-tax authority or such other authority or agency;
(c) the person discovers the inaccuracy after the statement is furnished and fails to inform and furnish correct information within a period of 10 days as specified under section 285BA(6), then, the prescribed income-tax authority may direct that such person shall pay, by way of penalty, a sum of fifty thousand rupees.
* Rules in this regard are yet to be notified.
18. Penalty for failure to furnish statement or information or document by an eligible investment fund.
A new section 9A has been inserted by Finance Act, 2015 to provide that fund management activity carried out by an eligible offshore investment fund through an eligible fund manager acting on behalf of such fund shall not constitute business connection in India (subject to certain conditions)
One of the condition is that every eligible investment fund shall, in respect of its activities in a financial year, furnish within 90 days from the end of the financial year, a statement in the prescribed form to the prescribed income-tax authority containing information relating to the fulfilment of the specified conditions or any information or document which may be prescribed. Failure to comply with this condition shall result in penalty of Rs. 5,00,000
19. Penalty for Failure to furnish any information or document as required by section 92D(3)
As per section 92D(3) the tax authorities may, in the course of any proceeding under the Act, require any person who has entered into an international transaction or specified domestic transaction to furnish any information or document (as provided in section 92D read with rule 10D). Such information or document is to be produced within a period of 30 days from the date of receipt of a notice issued in this regard (the period can be extended for further 30 days by the tax authorities).Failure to comply with these provisions shall attract penalty under section 271G.
As per section 271G, if any person who has entered into an international transaction or specified domestic transaction fails to furnish any such information or document as discussed above, then the tax authorities may direct that such person shall pay, by way of penalty, a sum equal to 2% of the value of the international transaction or specified domestic transaction for each such failure.
20. Penalty Section 271GB for failure to furnish report or for furnishing inaccurate report under Section 286
If any reporting entity fails to furnish report [as referred to in Section 286(2)] in respect of international group, then it would be liable to penalty of –
a) Rs 5,000 for every day for which failure continues, if the period of failure does not exceed one month; or
b) Rs 15,000 for every day for which the failure continues beyond the period of one month.
Where a reporting entity provides inaccurate information in the report [as referred to in Section 286(2)], then it is liable to pay penalty of Rs 5,00,000, subject to satisfaction of conditions.
21. Penalty for failure to furnish information or document under section 285A
A new section 285A has been inserted by Finance Act, 2015 to provide for a reporting obligation on Indian concern through or in which the Indian assets are held by the foreign company or the entity.
The Indian entity shall be obligated to furnish information relating to the off-shore transaction having the effect of directly or indirectly modifying the ownership structure or control of the Indian company or entity.
In case of any failure on the part of Indian concern, it shall pay by way of penalty-
(a) a sum equal to 2% of the value of the transaction inrespect of which such failure has taken place in case where such transaction had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern; and
(b) a sum of Rs. 5,000 in any other case.
22. Penalty for failure to file the TDS/TCS return
As per section 271H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271H. Minimum penalty shall be levied of Rs.10,000 which can go uptoRs. 1,00,000. Penalty under section 271H will be in addition to late filing fee prescribed under section 234E.
Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. Penalty under section 271H can also be levied if the deductor/collector files an incorrect TDS/TCS return.
No penalty will be levied under section 271H for thefailure to file the TDS/TCS return, if the person provesthat after paying tax deducted/collected by him, alongwith the fee and interest (if any), to the credit of theCentral Government, he has filed the TDS/TCS returnbefore the expiry of a period of one year from the duedate of filing the TDS/TCS return. In other words, nopenalty under section 271H will be levied in case of delayin filing the TDS/TCS return if following conditions aresatisfied :
1) The tax deducted/collected at source is paid to the credit of the Government.
2) Late filing fees and interest (if any) is paid to the credit of the Government.
3) The TDS/TCS return is filed before the expiry of a period of one year from the
due date specified in this behalf.
It should be noted that the above relaxation is applicableonly in case of penalty levied under section 271H for thedelay in filing of TDS/TCS return and not for filing incorrect TDS/TCS return.
23. Penalty for failure to furnish information or furnishing inaccurate information under section 195
As per section 195(6) of the Act, any person responsible for paying to a non-resident (not being a company) or to a foreign company, any sum (whether or not chargeable to tax), shall furnish the information relating to payment of such sum in Form 15CA and 15CB.
In case of any failure in this regard a penalty of Rs. 1,00,000 shall be leviable.
24. Penalty for 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 require the person to sign the statements or may issue him a summon for his attendance. Failure to comply with these directions or notices can attract penalty under section 272A(1) Tax authorities also issues notice under Section 142(1)/Section 143(2) or issues direction for special audit under Section 142(2A). In other words, penalty under section 272A(1) shall be levied if a person refused or fails to:
Attend office to give evidence or produce books of account, etc., in c ompliance with summons under section 131(1)
Comply with notice under Section 142(1)/Section 143(2) or fails to comply with direction issued under Section 142(2A)
Penalty leviable under section 272A(1) is Rs. 10,000 for each failure/default.
25. Penalty under section 272A(2)
Penalty under section 272A(2) is levied in respect of following defaults :
1. Failure to furnish requisite information in respect of securities as required under section 94(6). As per section 94(6) the tax authorities can issue notice asking the taxpayer to furnish the particulars of securities owned by him during the year.
2. Failure to give notice of discontinuance of business or profession as required under section 176(3) (within 15 days of discontinuance of business or profession).
3. Failure to furnish in due time returns, statements or certificates, deliver declaration, allow inspection, etc., under sections 133, 134, 139(4A), 139(4C), 192(2C), 197A, 203, 206, 206C, 206C(1A) and 285B.
4. Failure to deduct and pay tax under section 226(2).
5. Failure to file a copy of the prescribed statement within the time specified in section 200(3) or the proviso to section 206C(3) (up to 1-7-2012).
6. Failure to file the prescribed statement within the time specified in section 206A(1). Section 206A(1) deals with filing of quarterly return by banks, cooperative society, etc. in respect of payment of interest to residents without deduction of tax.
7. Failure to deliver or cause to be delivered a statement under Section 200(2A) or Section 206C(3A) within prescribed time.With effect from 01/06/2015, it has been mandatory for an office of the Government paying TDS or TCS, as the case may be, without production of a challan to deliver to the prescribed authority, a statement in such form and manner as may be precribed.
Penalty in above cases shall be levied at Rs. 100 per day for every day during which the default continues. In respect of penalty for failure, in relation to a declaration mentioned in section 197A, a certificate as required by section 203 and for default under section 200(2A), 200(3), 206, 206C, 206C(3) and 206C(3A), the quantum of penalty shall not exceed the amount of tax deductible or collectible.
26. Penalty for failure to comply with provisions of section 133B
Section 133B empowers the tax authorities to enter the place of business of the taxpayer to collect information required by the authorities which will be useful under the Act. If the taxpayer fails to comply with the provisions of section 133B, then penalty shall be levied under section 272AA(1) uptoRs. 1,000.
27. Penalty for Failure to comply with provisions of relating to Permanent Account Number (PAN)
272B provides penalty in case of default by the taxpayer in complying with the provisions of section 139A or knowingly quoting incorrect PAN in any document referred to in section 139A(5)(c) or intimates incorrect PAN for the purpose of section
1. Section 139A provides various provisions relating to obtaining of PAN and quoting of PAN by the taxpayer.
2. Section 139A(5)(c) provides for quoting of PAN by the taxpayer in certain prescribed financial transactions.
3. Section 139A(5A) provides for intimating PAN by the taxpayer to the person deducting tax at source (i.e. TDS).
4. Section 139A(5C) provides for intimating PAN by the taxpayer to the person collecting tax at source (i.e. TCS).
Penalty under section 272B is Rs. 10,000.
28. Penalty for Failure to comply with provisions relating to Tax Deduction Account Number or Tax Collection Account Number
As per section 203A, every person deducting tax at source or collecting tax at source has to obtain the Tax Deduction Account Number or Tax Collection Account Number (as the case may be).
Section 203A(2) provides that the deductor or collector of tax at source should quote his Tax Deduction Account Number or Tax Collection Account Number (as the case may be) in the challans, certificates, statement and other documents relating to TDS/TCS. Section 272BB(1) provides for penalty for failure to obtain Tax Deduction Account Number or Tax Collection Account Number (as the case may be) and section 272BB(1A) provides for penalty for quoting incorrect Tax Deduction Account Number or Tax Collection Account Number (as the case may be). Penalty under section 272BB is Rs. 10,000.
29. Relaxation from penalty
Apart from designing penalty provisions, the Income-tax Act also contains provisions for granting relief from penalty in genuine / deserving cases. Relief can be granted in the following manner:
1. Under section 273A(4) the Principal Commissioner or Commissioner of Income tax has power to waive or reduce any penalty levied under the Income-tax Act. Penalty can be waived or reduced by the Commissioner of Income-tax if the conditions specified in section 273A(4) in this regard are satisfied.
2. Apart from shelter of section 273A(4) as discussed earlier, section 273B also provides relief from penalty in genuine cases. As per section 273B, no penalty shall be levied under section 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) or 273(2)(b) or (c), if the taxpayer proves that there was reasonable cause for such failure.