Yes, there are certain ways to avoid or minimize the penalty imposed for failure to furnish a TDS return under the Income Tax Act. The penalties are primarily covered under Sections 234E and 271H of the Act.

1. Understanding the Penalty for Late Filing of TDS Return

• Late Fee under Section 234E:

  • A fine of ₹200 per day is levied until the TDS return is filed.
  • The total penalty cannot exceed the amount of TDS deducted.

• Penalty under Section 271H:

  • A minimum penalty of ₹10,000 and a maximum of ₹1,00,000 may be imposed for failure to file the return within one year.
  • This penalty is in addition to the late fee under Section 234E.

2. Ways to Avoid or Reduce the Penalty

✅ File the TDS Return at the Earliest

• If you have missed the deadline, file the TDS return as soon as possible to minimize the late filing fee under Section 234E.

✅ Request for Waiver of Penalty under Section 271H

• Under certain circumstances, the Assessing Officer (AO) may waive the penalty under Section 271H if:
  • TDS is deposited to the government account.
  • Late filing fees under Section 234E are paid.
  • TDS return is filed before the expiry of one year from the due date.

✅ File an Appeal to the Commissioner of Income Tax (CIT) (Appeals)

• If a penalty is levied, you can challenge the order before the CIT(A) by providing a reasonable cause for delay (e.g., technical issues, natural calamities, unavoidable business disruptions).

✅ Apply for Condonation of Delay

• In some genuine cases, the Income Tax Department may consider a condonation request if the delay was beyond your control.

✅ Ensure Correct Filing of Returns to Avoid Additional Penalties

• Incorrect filing of TDS returns may increase penalties. Always verify:
  • PAN details of deductees.
  • TDS amount credited.
  • Quarterly return deadlines (31st July, 31st October, 31st January, and 31st May).

Final Advice

If you have missed filing a TDS return, do not delay further. File it immediately and pay the late fees to minimize the financial burden. If there is a reasonable cause for the delay, you may approach the IT department for penalty relief under Section 271H.

Penalty on Concealment of Income in Search Cases

Under the Income Tax Act, 1961, if undisclosed income is found during an Income Tax Search (Raid) conducted under Section 132, penalties are levied under Section 271AAB.

1. What is “Undisclosed Income” in Search Cases?

As per Section 271AAB, “undisclosed income” refers to:
✔️ Unaccounted money, assets, or documents found during the search.
✔️ Income that is not recorded in books of accounts and not disclosed before the search.
✔️ False entries or suppression of income detected during the search.

2. Penalty Provisions Under Section 271AAB

The penalty for concealment of income in search cases depends on the circumstances under which the disclosure is made.

📌 Note: If the case falls under Section 271(1)(c) (general penalty for concealment of income) instead of Section 271AAB, the penalty can be 100% to 300% of the tax evaded.

3. Important Considerations

✔️ The penalty is mandatory if undisclosed income is detected in a search.
✔️ If the taxpayer voluntarily discloses the income before the search begins, no penalty is levied.
✔️ If the taxpayer fails to cooperate, the penalty can go up to 90% of the concealed income.

4. How to Avoid Maximum Penalty?

✔️ Voluntarily disclose any unreported income before a search happens.
✔️ Cooperate with tax authorities during the search proceedings.
✔️ File the return on time and pay taxes on undisclosed income.

Final Thought

The penalties under Section 271AAB are severe. If you anticipate any undisclosed income, it’s always better to voluntarily disclose and pay taxes rather than face high penalties and legal action in search cases.

Penalty on Under-Reporting of Income under the Income Tax Act

Under the Income Tax Act, 1961, under-reporting of income is penalized under Section 270A. The penalty is imposed when a taxpayer declares lower income than what is assessed by the tax department.

1. What is Considered Under-Reported Income?

A taxpayer is considered to have under-reported income if:
✔️ The assessed income exceeds the declared income.
✔️ Loss claims are reduced due to incorrect reporting.
✔️ Expenses are disallowed due to non-compliance.
✔️ Income is detected during reassessment exceeding earlier returns.
✔️ Income is found in search/survey operations but not reported.

2. Penalty for Under-Reporting Income (Section 270A)

📌 Example:

• Declared Income = ₹8 lakh
• Assessed Income (after adding under-reported income) = ₹12 lakh
• Additional Tax Due = ₹1.2 lakh
• Penalty (50% of ₹1.2 lakh) = ₹60,000 (if not misreported)
• Penalty (200% of ₹1.2 lakh) = ₹2.4 lakh (if misreported)

3. When No Penalty is Levied?

The penalty will not be imposed if:
✔️ The taxpayer voluntarily revises the return before scrutiny.
✔️ The under-reporting happened due to genuine differences in tax interpretation.
✔️ The income addition is due to a transfer pricing adjustment.
✔️ The taxpayer can justify the mistake with reasonable evidence.

4. How to Avoid Penalty for Under-Reporting?

✅ File accurate tax returns with complete disclosures.
✅ Respond to tax notices and justify any discrepancies.
✅ Maintain proper documentation for deductions and income sources.
✅ If errors are found, revise the return voluntarily before scrutiny begins.

Final Thought

Under-reporting income can attract a minimum 50% penalty and up to 200% in case of misreporting. To avoid penalties, ensure accurate reporting and comply with tax regulations.

Read How tax is calculated on under reported Income?