Income Tax Penalties —
Section 270A, 271, 271B & 271H
What penalty applies when income is under-reported or misreported, how the older Section 271(1)(c) still works, and the separate penalties for tax-audit and TDS-return defaults — with immunity under Section 270AA.
From AY 2017-18 the main penalty section is Section 270A, which replaced Section 271(1)(c). Under-reporting income attracts 50% of the tax on the under-reported amount; deliberate misreporting attracts 200%. The old Section 271(1)(c) (100%–300%) still governs AY 2016-17 and earlier. Separate sections cover tax-audit defaults (271B), TDS/TCS-return defaults (271H) and late ITR filing (234F). All are levied over and above the tax and interest due.
Key Income-Tax Penalty Sections
The penalty rate, cap and trigger for every common default. Rates are current for FY 2025-26 (AY 2026-27) after the Union Budget 2025.
| Section | Default | Penalty | Cap |
|---|---|---|---|
| 270A | Under-reporting income (AY 2017-18+) | 50% of tax | No upper cap |
| 270A | Misreporting / deliberate concealment | 200% of tax | No upper cap |
| 271(1)(c) | Concealment (up to AY 2016-17) | 100%–300% | 300% of tax evaded |
| 271B | Failure to get accounts tax-audited | 0.5% of turnover | ₹1,50,000 |
| 271H | Late / non-filing of TDS-TCS return | ₹10,000 min | ₹1,00,000 |
| 234E | Fee for delay in TDS-TCS statement | ₹200 / day | Up to TDS amount |
| 234F | Late filing of ITR (ex-271F) | ₹1,000 / ₹5,000 | ₹5,000 |
| 271AA | Transfer-pricing docs not kept | 2% of value | No upper cap |
| 271C | Failure to deduct TDS | = tax not deducted | Amount of TDS |
The Income-tax Act, 2025 (effective AY 2026-27) renumbers these clauses — e.g. Section 270A maps broadly to clause 439 — but the familiar 1961 numbers remain the search and reference standard.
Section 270A — Under-Reporting vs Misreporting
Under-reporting means the assessed income is higher than the returned income — omissions, arithmetical errors, a disallowed deduction or a difference of opinion, without deliberate intent. Penalty: 50% of the tax on the under-reported income.
Misreporting is the graver charge: false entries, fraudulent claims, suppression of evidence, manipulation of accounts or fictitious losses. Penalty: 200% of the tax on the misreported amount — and no immunity under 270AA.
Under-reporting — immunity possible
- Assessed income > returned income
- Genuine omissions or errors
- Disallowed deduction / interpretation
- Immunity available under Section 270AA
- No prosecution if bona fide
Misreporting — no relief
- False entries or fraudulent claims
- Suppression of facts / evidence
- Manipulated accounts, fictitious loss
- No Section 270AA immunity
- Possible prosecution u/s 276C
For FY 2025-26 the department cross-matches your return against AIS, TIS and Form 26AS. Interest, dividends, capital gains or contract receipts that appear there but not in your ITR are flagged automatically and can trigger a Section 270A under-reporting penalty. Reconcile before filing.
Received a Section 270A show-cause notice? Get your reply drafted by a CA.
Reply to the Notice →Section 271(1)(c), 271B & 271H
Beyond income under-reporting, three penalties catch out businesses and deductors most often — the legacy concealment penalty and the audit / TDS-return defaults.
| Section | Applies to | Penalty | Key point |
|---|---|---|---|
| 271(1)(c) | Concealment up to AY 2016-17 | 100%–300% | Replaced by 270A from AY 2017-18 |
| 271B | Turnover crosses tax-audit limit but no audit | 0.5% of turnover, max ₹1.5L | Reasonable cause can waive it |
| 271H | TDS/TCS return filed late or not filed | ₹10,000 to ₹1,00,000 | Nil if fixed within 1 month |
A separate ₹200/day fee under Section 234E runs from the TDS-return due date and is not a penalty — it cannot be waived.
From 1 April 2025 the Section 271H waiver window was cut from one year to one month. No 271H penalty applies if you (a) deposit the TDS/TCS, (b) pay the Section 234E fee and interest, and (c) file the return within one month of the due date. Miss that window and the ₹10,000–₹1,00,000 penalty can be levied.
- 271B (tax audit): 0.5% of total sales/turnover/gross receipts, capped at ₹1,50,000 — no penalty if there was a reasonable cause (illness, seized records, etc.).
- 271H (TDS return): minimum ₹10,000, maximum ₹1,00,000, plus the separate ₹200/day Section 234E fee.
- 271C: failure to deduct TDS attracts a penalty equal to the tax not deducted.
Behind on TDS returns? File and fix defaults before the penalty is levied.
File TDS Returns →Immunity from Penalty & Prosecution
Section 270AA lets you escape a Section 270A penalty and Section 276C prosecution for under-reporting (not misreporting) if strict conditions are met on time.
- Pay the assessed tax & interest within 30 days of the demand notice (u/s 156)
- Apply for immunity in the prescribed form within the specified time
- Do not file — or withdraw — any appeal against the assessment
- Under-reporting only — misreporting cases are excluded
How the 270A Penalty Adds Up
50% Under-reporting
200% Misreporting
The penalty is on the tax on the extra income, not on the income itself, and is charged in addition to that tax plus interest under Sections 234B/234C.
A Section 270A penalty is a monetary charge. A wilful attempt to evade tax can also draw prosecution under Section 276C — imprisonment of up to 7 years — which is in addition to, not instead of, the penalty. Prosecution needs the Principal Commissioner’s sanction and is reserved for serious, deliberate fraud.
Frequently Asked Questions
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