Let’s explore the penalties for not filing a Tax Audit Report in India:
1. Penalty under Section 271B Section 271B of the Income Tax Act deals specifically with the penalty for not furnishing a Tax Audit Report. If a person who is required to get their accounts audited under Section 44AB of the Income Tax Act fails to do so, they are liable to pay a penalty. The penalty amount is calculated at 0.5% of the total turnover or gross receipts, subject to a maximum limit of ₹1,50,000.
2. Disallowance of Deductions Apart from the penalty mentioned above, not filing a Tax Audit Report can have significant financial implications. The Income Tax Department may disallow various deductions and expenses claimed by the taxpayer. This can result in a higher taxable income, leading to increased tax liability.
3. Interest on Tax Due If the income tax liability is higher due to the disallowance of deductions as a result of not filing the Tax Audit Report, the taxpayer may also be liable to pay interest under Section 234A, 234B, and 234C of the Income Tax Act. Interest is charged on the amount of tax that should have been paid and the delay in paying it.
4. Legal Proceedings Failure to comply with tax audit requirements may lead to legal proceedings initiated by the Income Tax Department. These proceedings can be time-consuming and may result in additional penalties and fines.
5. Impact on Future Compliance Non-compliance with tax audit requirements can negatively impact the taxpayer’s compliance rating with the Income Tax Department. This may lead to increased scrutiny in the future and a higher likelihood of audits and investigations.
6. Reputation Damage For businesses, not filing a Tax Audit Report can damage their reputation and credibility. It may lead to trust issues with stakeholders, including clients, suppliers, and investors.
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