Avoiding taxes against the law, can lead tosevere consequences. Make sure to understandwhere people may try to evade taxes and becareful when filing your income tax return.Tax evasion involves unlawfully avoiding taxpayments through actions like:
- Not disclosing or hiding income
- Exaggerating deductions or using fake documents to claim deductions
- Submitting incorrect income tax returns
- Not filing tax returns
- Failing to report cash transactions
- Making false entries in books of accounts treduce taxable income or increase expense deductions
Tax evasion is a serious offence punishable underin the Income-tax Act 1961. It’s crucial tounderstand that penalties may apply automatically or at the discretion of tax authorities.
Here are some penalties specified in the Act:
- Default in Self-Assessment Tax Payment:
Penalty: Up to the amount of tax in arrears as
determined by the Assessing Officer.
- Default in Furnishing Return:
- Penalty: Rs 5,000 if the return is filed after thedue date. Reduced to Rs 1,000 if the total incomeis less than Rs 5 lakhs.
3. Underreporting and Misreporting of Income:
- Penalty: 50 per cent of tax on underreported income; 200 per cent if misreporting is involved.-
- Examples of underreporting: Assessing incomegreater than processed return or manipulatinglosses.
- Examples of misreporting: Misrepresentation offacts, failure to record investments, unsupportedexpenditure claims, etc.
4. Failure to Maintain Records of Accounts:
- Penalty: Rs 25,000 for not maintaining records as per section 44AA. For international transactions, 2 per cent of the value of such transactions or specified domestic transactions.
5. Failure to Get Accounts Audited:
Penalty: Lower of Rs 1,50,000 or 0.5 per cent oftotal sale/turnover/gross receipts for not gettingaccounts audited. For failure to furnish auditreports related to foreign transactions, a penaltyof Rs 1,00,000 is payable.
6. Determination of Undisclosed Income:
- Penalty: Not less than the tax amount but notexceeding three times the tax leviable in respectof the undisclosed income.
7. Penalty for Default in Tax Payment:
Penalty: Imposed by the Assessing Officer if thetaxpayer is treated as an assessee in default. Thepenalty does not exceed the tax in arrears.