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Penalties for income tax evasion
August 20, 2026Paying taxes often do not go well with people, for many questions the concept of giving away part of their money. Although they have the freedom of self - assessing their income before paying, this does not mean complete evasion from paying taxes by not declaring a particular stream of income. Income tax evasion is a crime in India and attracts severe penalties. It is different from tax avoidance which is a legal activity. Tax avoidance is supported by tax laws. They help reduce the amount payable as tax. Nowadays' compliance w.r.t income tax payment is being scrutinized more by income tax department and penalties for non-compliance have also been increased to widen the tax base.
Following penalties are levied for tax evasion -
- As per Section 140 (1), if the taxpayer fails to pay either wholly or partly self - assessment tax or interest then he/she shall be treated as a defaulter. A penalty under Section 221(1) will be imposed by the assessing officer. However, if the taxpayer is able to justify the delay in paying taxes then the assessing officer can even exempt the assessed from paying penalty.
- The penalty for concealment will be 100% to 300% of the tax as per Section 271. If the tax authorities feel the need too raid a premise to discover the undisclosed income, in such case penalty levied will be under Section 271 AAB.
- If a person fails to file tax statements within the time allotted, then a penalty of Rs. 200 per day may be charged for every day that the statements are not filed.
- In case a person or a company fails to maintain their accounts properly as directed by section 44AA, a penalty of Rs. 25,000 may be levied.
- If a company fails to get itself audited or fails to provide a report of the said audit, then a penalty of Rs. 1.5 lakhs or 0.5% of the sales turnover, whichever is less, may be charged.
- If a report from an accountant is not provided as directed, then a fine of Rs. 1 lakh may be levied.
- In case an organization fails to deduct tax where it is supposed to while making payments then the penalty could be payment of the tax due.
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