One has to face income tax penalties and late fees if he does not comply with the laws, rules as well as regulations under the Income Tax Act. Having said that, many people think that these income tax penalties and late fees are applicable only on late filing of Income Tax Returns however, that is not the case. There are various other cases wherein you might have to pay penalties and late fees. In this blog, we will tell you about the cases where income tax penalties and late fees are applicable and how can you avoid them.
Income Tax Penalties and Late Fees: How to avoid it?
The various way to avoid income tax penalties and late fees are as follows:
Report correct income or disclose income from all the sources
In order to avoid income tax liability, many people tend to underreport their total income or do not report all the income from all the sources. This is called tax evasion and is punishable under the income tax act. And, the penalty for the same is:
– 100% of the tax which was sought to be evaded by the person.
– 300% of the tax which was sought to be evaded by the person.
Therefore, make sure that you report the correct income as well as income from all the sources while filing income tax online.
Also Read: Ways to Save Taxes in 2023!
Make tax payments as per the Income Tax Slab
One has to pay the income tax as per his tax liability. And, this tax liability depends upon the income tax slab in which the person falls in. Having said that, if the person does not pay the income tax as per his income tax slab rate, then he will have to pay an income tax penalty. This penalty is determined by the Assessing Officer. In any case, the amount of this penalty will not be more than the amount of the tax arrears. So, to avoid income tax penalties, make sure that you pay the tax amount as per your Income Tax Slab.
File ITR on time
In order to avoid income tax penalties and late fees, one should make sure that Income Tax filing in India within the due date.
For the Financial Year 2023-2024, the due date for filing Income Tax Return was 31st July, 2024. If you did not file your Income Tax Return till date, then you will have to have to pay income tax penalties and late fees.
Maintain proper books of accounts
Maintaining proper books of accounts leads to correct tax liability calculation of the businesses. Therefore, to avoid the income tax late penalty and late fee, make sure you maintain proper books of accounts for your business.
Ensure books of account are audited
Merely maintaining books of accounts is not enough. They require auditing too, if the turnover exceeds a certain threshold limit. If the books of account that are required to be audited are not audited, then again you will have to face income tax penalties.
Make correct entries in books of accounts
Apart from the above two points, if the person does not put the correct entries in the books of account and the Income Tax Officer discovers the same, then the person shall be liable to income tax penalties. The penalty in such a case is equal to the amount of incorrect entries. Therefore, again make sure not to skip or forge any entry in your books of account.
Comply with the order of Income Tax Officer
If you do not happen to comply with the order of Income Tax Officer or do not reply to the notices, then also you will have to face income tax penalties. Having said that, this penalty can be as huge as Rs. 10,000 per failure. Therefore, make sure that you comply with the order of Income Tax Officer. This can save yourself from income tax penalties.
Disclose international transactions
Non-disclosure of international transactions attracts an income tax penalty of 2% of the value of the transaction to a whopping amount of Rs. 50,000/-. Accordingly, disclose all the international transactions to avoid the risk of income tax penalties.
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