Even small mistakes in income tax compliance can lead to hefty penalties, with taxpayers facing fines of up to ₹1.5 lakh for failures related to tax audit requirements, officials have warned.

Under the Income Tax Act, businesses and professionals whose turnover or receipts exceed the prescribed threshold are required to get their accounts audited by a qualified chartered accountant and submit the audit report within the stipulated deadline. Failure to comply with these audit provisions can attract a penalty under Section 271B, which may amount to 0.5% of total turnover or gross receipts, subject to a maximum of ₹1.5 lakh.

Tax experts note that many taxpayers assume penalties apply only in cases of tax evasion. However, even procedural lapses, such as missing the audit deadline, submitting incorrect forms, or failing to upload the audit report properly, can trigger penalties.

Common mistakes that may lead to penalties include:

• Not conducting a mandatory tax audit despite crossing the turnover limit
• Delayed submission of the tax audit report
• Errors or mismatches in audit details and income tax returns
• Failure to maintain proper books of accounts

The Income Tax Department has increased the use of data analytics and wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital scrutiny, making it easier to identify non-compliance. Automated systems now flag discrepancies between turnover reported in GST returns, bank transactions, and income tax filings, increasing the likelihood of notices being issued.

However, the law does provide relief in genuine cases. If a taxpayer can prove a reasonable cause—such as illness, natural calamities, or unavoidable technical issues—the penalty may be waived at the discretion of tax authorities.

Experts advise taxpayers, especially small businesses and professionals, to stay updated on compliance requirements, maintain accurate records, and consult tax professionals well before filing deadlines. Timely audits and correct filings not only help avoid penalties but also reduce the stress and cost of responding to tax notices later.

With stricter enforcement and rising wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital surveillance, taxpayers are being urged to treat even “small” income tax obligations seriously, as minor oversights can now lead to major financial consequences.

 

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