A strict fee policy for late tax audit report submissions is introduced in the budget for the fiscal year 2026–2027, with a late filing price of Rs 75,000.
Budget Announcement on Tax Audit Report Penalties
The Budget, which Finance Minister Nirmala Sitharaman delivered to the Lok Sabha on February 1, states that “If an individual does not have his books audited for any tax year or years and provide the audit report required by section 63, he will be responsible for paying the following fees: (i) Rs 75,000 for a delay of up to one month if the failure persists; and (ii) Rs 15,0000 beyond that.”
In the event that taxpayers neglect to have their accounts audited and fail to provide the audited report, they will be required to pay a cost of Rs 1,50,000 for any further delays and Rs 75,000 for any delays up to one month.
Finance Bill Subsections 427 and 428
The Finance Bill’s subsections 427 and 428 modify the fines and fees associated with income tax compliance.
A person who is required to file an income return under section 263 must pay a charge of Rs 1,000 if his total income does not exceed Rs 5 lakh and Rs 5,000 otherwise, according to section 428.
According to the Finance Bill 2026, the same fee—that is, Rs 1,000 if the total income is less than Rs 5 lakh and Rs 5,000 if it exceeds Rs 5 lakh—will also apply if a person files an income return under section 263(5) after nine months from the end of the relevant tax year.
Penalties for Delayed Statements
According to section 427, without affecting the Act’s provisions, anyone who neglects to submit or guarantee the submission of a statement required by section 397(3)(b) within the allotted period will be subject to a fine of Rs 200 for each day that the failure persists.
Nevertheless, this fee must be paid prior to the submission of the statement and cannot exceed the amount of tax that must be collected or deducted.
If someone who is obligated by section 508(1) to provide a reportable account or a statement of financial transactions does not do so within the time frame specified by section 508(2), According to the finance bill, he will be required to pay a cost of Rs 200 every day for the duration of the default, with a maximum amount of Rs 1 lakh.
📊 Tax Audit Report Penalty Overview
- Late Filing Fee (≤1 month): Rs 75,000
- Delay Beyond 1 Month: Rs 1,50,000
- Applicable Sections: Section 63, Section 427, Section 428, Section 508
- Income Return Late Filing: Rs 1,000 (≤5 lakh), Rs 5,000 (>5 lakh)
- Daily Penalty for Statements: Rs 200/day (max Rs 1 lakh)
Frequently Asked Questions
1. Who is responsible for paying the penalty of Rs 1.5 lakh?
Taxpayers have to get their accounts audited under Section 63 and who delay submitting the audit report beyond one month.
2. What is the cost for late filing of income tax returns?
Rs 1,000 if total income ≤ Rs 5 lakh, and Rs 5,000 if total income > Rs 5 lakh, applicable even if filing after nine months from the end of the tax year.
3. How is the daily cost for delayed statements calculated?
The charge for statements under Section 397(3)(b) is Rs 200 per day until they are submitted, but it cannot be more than the amount of tax that should have been collected or deducted.
4. How much is the maximum fine for not reporting financial transactions on time?
The maximum fee for Section 508 reporting is Rs 200 per day, with a cap of Rs 1 lakh.
5. When will these additional costs take effect?
As stated in the Budget 2026, these provisions will take effect in the fiscal year 2026–2027.
⚠️ Tax Filing Compliance Tips
- Audit Report: File on time to avoid Rs 1.5 lakh penalty
- Income Tax Return: File before nine months for lower fees
- Daily Statement Submission: Avoid Rs 200/day penalties
- Section 508 Reporting: Ensure reportable transactions are timely
- Overall Advice: Strictly adhere to deadlines to avoid heavy fines
Conclusion
The Finance Bill 2026 greatly increases the penalties for tax compliance delays, particularly with regard to filing financial statements and tax audit reports. In order to avoid fines of up to Rs 1.5 lakh, taxpayers and businesses must now pay close attention to deadlines. In addition to avoiding severe penalties, timely filing guarantees seamless adherence to income tax laws.
