A Penalty is a form of punishment given for violating a law. In the context of Income Tax, one shall be penalized if one fails to comply with the rules mentioned in the Income Tax Act,1961. The penalty can either be a fixed amount or a percentage of a certain amount. However, the income tax department has warned salaried taxpayers against trying to evade tax by indulging in these malpractices and pointed out that these would attract penalties as per law. This article focus primarily on penalties levied on every taxpayer as per Income Tax Act.

Different kinds of Defaults

Following are some common defaults made by persons that invite penalties:

1. Failing to maintain books of accounts
2. Failing to get accounts audited
3. Making false entries in books of accounts
4. Failing to deduct TDS
5. Concealment or inaccurate reporting of income
6. Failing to comply with the directions issued by the income tax officer
7. Failing to accept loan or advance following the rules mentioned
8. Failing to disclose details of international transactions

Income Tax Penalties:

1. Penalty for Concealment/Hiding of income or furnishing inaccurate particulars of income: Income Tax is levied on the total income (amount earned from all sources like salaries, rent, capital gains etc.) earned by a person in a particular year.
2. Penalty for late filing of income tax return: The gross income earned by a person is required to be disclosed to the income tax department. Failing to file the return within the said limit attracts a penalty.
3. Penalty for Default in Making Payment of Tax: Income Tax amount payable by a person depends on the relevant rate of the applicable slab. These slab rates depend on the total amount of income earned in a financial year.
4. Penalty for Failing to Deduct TDS: TDS or tax deducted at source, is a concept whereby a person/organization making certain payment to another person is required to deduct tax at the time of making such payment.
5. Penalty for faking entries in books of accounts: The monetary transactions of a business are recorded in the accounts maintained. These books are essential for calculating income tax.

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