Income Tax Act 1961 – Penalties and Prosecution

Income tax has to be paid by every person if the taxable income exceeds their respective basic exemption limit. Income Tax also has several penalties if the taxpayers made default in making the payment of tax liability. Rise in tax payers request for more trust on voluntary compliance by assesses suitable provisions for penalties and prosecution have to be implemented by imposing additional tax burden in case default in payment of tax liabilities. Now we I shall discuss the various penalties and prosecutions.

• According to the provisions of section 140A(1) of income tax act, if the taxpayer hadfailed to pay entire or any portion of income tax liability or any interest outstanding will be penalized with the amount which Assessing Officer may
• If the assesse did not make payment of tax liability according to the prescribed time limits of income tax act, then the penalty may be imposed with such amount as the Assessing Officer may levy [sec. 221(1)]
• In case of failure to maintain books of account according to u/s 44AA then the penalty will be imposed up to rs25000.
• In case of failure to get accounts audited or furnish such report u/s 44AB along with the return u/s.139(1), the penalty may be imposed up to 0.5%(half a percent) of total sales or turnover or gross receipts or 1,50,000, whichever is less.
• A person deemed to be an assessed in default under section 201(1), for failure to deduct tax or to pay the tax after deduction, is liable to pay simple interest of 1.5% for every month or part of the month from the date on which tax was deducted to the date on which such tax is actually paid.
• An order under section 201(1) deeming a person to be an assessed in default for failure to deduct the whole or any part of the tax from a person resident in India has to be passed within two years from the end of the financial year in which the statement of TDS is filed by the deductor.
• Penalty will be charged as interest under section 234B is attracted for non-payment of advance tax of an amount less than 90% of assessed tax. The interest liability would be 1% per month or part of the month from 1^st April following the financial year up to the date of determination of income under section 143(1).