Penalty

In taxation, a penalty is a financial charge or punitive measure imposed by tax authorities when a taxpayer fails to comply with legal requirements under the tax law. Penalties may arise due to various types of non-compliance, such as: Failure to file returns on time Concealment or misreporting of income Failure to maintain proper books of accounts Failure to pay taxes or incorrect payment of taxes Non-compliance with notices issued by the tax department Purpose of Penalties To enforce compliance To discourage tax evasion To ensure accuracy and transparency Nature Penalties may be: Monetary (fixed amount or percentage-based) Procedural (e.g., prosecution in severe cases) If you want, I can also provide examples of common penalties under the Income Tax Act.

Example: A taxpayer fails to file their Income Tax Return (ITR) by the due date. If their total income exceeds ₹5 lakh, a late filing fee of ₹5,000 is levied under Section 234F. Additionally, if tax remains unpaid, interest under Section 234A may also apply. This combination of fees and interest constitutes the penalty for late filing and non-compliance.