5 Income Tax Penalties Every Taxpayer Should Be Aware Of

 5 Income Tax Penalties Every Taxpayer Should Be Aware Of

A penalty is a kind of punishment for breaking the law. In the context of income tax, failure to follow the regulations outlined in the Income Tax Act of 1961 will result in a penalty. The penalty might be either a set sum or a percentage of the amount in question.

WHAT ARE THE DIFFERENT TYPES OF DEFICIENCIES?

The following are some examples of frequent mistakes committed by people that result in penalties:

Failure to keep proper accounting records

Failure to have accounts audited

Making fraudulent entries in accounting books

TDS is not being deducted.

Income concealment or incorrect reporting

Failure to follow the instructions of the income tax officer

Failure to accept a loan or advance in compliance with the stated rules

Failure to provide information about overseas transactions

FIVE TAX PENALTIES YOU SHOULD BE AWARE OF

Here is a list of the top five most frequent mistakes committed by people, as well as the related fines outlined in the Income Tax Act.

Penalty for concealing/hiding income or providing false income information: The income tax is charged on a person's entire income received in a given year. This is a total income that comprises earnings from all sources such as salary, rent, capital gains, and so on.

Given this, it is common for individuals to hide their income from the assessing officer or provide inaccurate income figures in order to pay less income tax. This is a violation of the legislation.

In such circumstances, the tax penalty is one of the two listed below.

100 percent of the tax attempted to be dodged by the individual

300 percent of the tax claimed to be avoided by the individual

Penalty for late filing of income tax return: A person's gross income must be revealed to the income tax department in particular forms after each fiscal year before a stipulated date of the assessment year. These forms are referred to together as the Income Tax Return, or ITR.

The latest notified day for submitting income tax returns for the fiscal year 2018-19 was December 31, 2019. Failure to submit the return within the time limit but before March 31, 2020, results in a Rs. 10,000 penalty.

If a person's gross income is less than Rs.5,00,000, the penalty is reduced to Rs.1000.

CALCULATE RIGHT NOW

Penalty for Failure to Make Tax Payment: The amount of income tax due by a person is determined by the appropriate rate of the applicable slab. These slab rates are determined by the total amount of revenue generated throughout the fiscal year. The current slab rates are as follows:

Total income earned in a fiscal year. Tax rate applicable.

NIL up to Rs. 250000

5% of Rs.250001-Rs.500000

10% of Rs.500001-Rs.750000

15% of Rs.750001-Rs.1000000

20% of Rs.1000001-Rs.1250000

25% of Rs. 1250001-Rs.1500000

Rs.1500000 and Above 30 %

Any failure on the part of the assessee to pay tax at the relevant rate results in a tax penalty of an amount decided by the assessing officer. This sum may not exceed the amount of tax owed in arrears.

Penalty for Failure to Deduct TDS: TDS, or tax deducted at source, is a concept in which a person/organization making a payment to another person is obligated to deduct tax at the time of payment. This is done only if the amount to be deducted above a certain threshold and the deductor has a TAN (Tax Deduction and Collection Number). TDS examples include:

Employees' wages are taxed at the moment they are paid.

Banks deduct tax when crediting interest earned on fixed deposits.

Taxes are deducted when winnings from lotteries, crossword puzzles, and other games are paid out.

After deduction, the deducted amount is presented to the government. Failure to deduct TDS by the person responsible results in a tax penalty equal to the amount of tax that he failed to deduct.

Penalty for falsifying accounting entries: A business's monetary transactions are documented in the accounts that are kept. These books are required to calculate income taxes. It is also essential to present the income tax authorities with genuine and authentic accounts.

If discovered by an income tax official, any fake entry, false document, omitted entry, or papers produced by an unauthorized person are penalized under the Income Tax Act. In such circumstances, the penalty should be equivalent to the amount of the forged or missing entry.

The income tax is utilized to take progressive measures toward the nation's growth. As a result, it is the responsibility of every responsible citizen to pay taxes honestly. Relevant legislative reforms, such as e-filing of income tax returns, have enabled assessees' smooth payment of income tax. To avoid expensive fines, file your tax return easily and on time.