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The Union Budget 2026–27, presented by Finance Minister Nirmala Sitharaman on Sunday (February 1), proposed a stricter penalty framework for delays in filing tax audit reports under the proposed Income-tax Act, 2025.
The Finance Bill, 2026 introduces a graded fee structure under proposed Section 428, significantly increasing the financial cost of non-compliance. Even a one-day delay in submitting a mandatory tax audit report could attract a fee of ₹75,000, marking a shift from the earlier discretionary penalty regime.
Under the new framework, defaults are categorised into tiers based on the nature and duration of the delay. If a taxpayer fails to get accounts audited or does not furnish the tax audit report under Section 63, a fee of ₹75,000 applies from the very first day of delay. If the non-compliance continues beyond 30 days, the fee doubles to ₹1,50,000.
Separately, under Section 172, failure to submit a required report from a chartered accountant will attract a fee of ₹50,000 for the first month, rising to ₹1,00,000 if the delay extends further.
For standard income tax returns, the penalties remain relatively lower. Taxpayers with total income up to ₹5 lakh will face a maximum fee of ₹1,000 for delayed filing, while others will be liable to pay up to ₹5,000.
These provisions will come into effect from April 1, 2026, and will apply to assessment year 2026–27 and subsequent years. The government said the move aims to replace discretionary penalties with a fixed, predictable fee structure, giving taxpayers clarity on the cost of non-compliance.
ALSO READ | Budget 2026: Income tax filing deadline for small taxpayers extended to August 31
Tax experts note that the change places greater responsibility on businesses and professionals to meet audit deadlines, as even minor delays could result in substantial financial penalties.
The Finance Bill, 2026 introduces a graded fee structure under proposed Section 428, significantly increasing the financial cost of non-compliance. Even a one-day delay in submitting a mandatory tax audit report could attract a fee of ₹75,000, marking a shift from the earlier discretionary penalty regime.
Under the new framework, defaults are categorised into tiers based on the nature and duration of the delay. If a taxpayer fails to get accounts audited or does not furnish the tax audit report under Section 63, a fee of ₹75,000 applies from the very first day of delay. If the non-compliance continues beyond 30 days, the fee doubles to ₹1,50,000.
Separately, under Section 172, failure to submit a required report from a chartered accountant will attract a fee of ₹50,000 for the first month, rising to ₹1,00,000 if the delay extends further.
For standard income tax returns, the penalties remain relatively lower. Taxpayers with total income up to ₹5 lakh will face a maximum fee of ₹1,000 for delayed filing, while others will be liable to pay up to ₹5,000.
These provisions will come into effect from April 1, 2026, and will apply to assessment year 2026–27 and subsequent years. The government said the move aims to replace discretionary penalties with a fixed, predictable fee structure, giving taxpayers clarity on the cost of non-compliance.
ALSO READ | Budget 2026: Income tax filing deadline for small taxpayers extended to August 31
Tax experts note that the change places greater responsibility on businesses and professionals to meet audit deadlines, as even minor delays could result in substantial financial penalties.
