Taxpayers across India are expected to file their income tax returns by Sept. 15, disclosing their earnings for financial year 2025. While filing ITR for FY25 (AY 2025-26), taxpayers should ensure that their income disclosures are accurate, as even minor errors can lead to serious penalties or prosecution.
Income Tax Act, 1961, outlines penal provisions for misreporting and under-reporting of income while filing your ITR. Some individuals try to reduce their overall tax liability by making false HRA claims or showing personal expenses as business costs. But if caught, the penalties can be much higher than the amount they were originally trying to save.
Even in cases of genuine mistakes, such as incorrect reporting by your accountant, the Income Tax Department still holds you responsible. Hence, it is important to carefully review your ITR before submitting.
Under the Income Tax laws, misreporting or underreporting of income can attract penalties between 50% and 200% of the tax liability. Additionally, the I-T Department may also impose a 24% annual interest on the unpaid tax. In some cases, the offender may face prosecution under Section 276C.
Penalty For Failing To Pay TDS
Under Section 271(1)(C) of the Income Tax Act, penalties can be imposed on any person who fails to deduct or pay the applicable Tax Deducted at Source. The penalty is equal to the amount of tax not deducted or paid. However, under Section 273B, no penalty shall be imposed if the person can prove there was a reasonable cause for the failure to deduct the TDS.
Penalty For Underreporting Income
Income is said to be under-reported in cases where the deemed total income is higher than what was previously disclosed or determined. In cases, the penalty for under-reporting is 50% of the tax payable on the under-reported income, as per the Income Tax Act.
Penalty For Misreporting Income
Misreporting of income includes giving wrong information, hiding facts, making false entries in books, not reporting capital gains and claiming expenses without proof. Misreporting can attract a penalty of 200% of the tax evaded.
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