Delay in filing tax audit report may invite Rs 1.5 lakh penalty

The fee shall not exceed the amount of tax that is required to be deducted or collected and must be paid before the statement is submitted

• Late tax audit report submission incurs Rs 75,000 fee for up to one month delay
• Delay beyond one month in audit report submission incurs Rs 1,50,000 fee
• Late tax return filing incurs Rs 1,000 to Rs 5,000 fee based on income

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The budget for financial year 2026-27 introduces a stringent fee policy for delays in submitting tax audit reports, with late submission incurring a fee of Rs 75,000.

“...If a person fails to get his accounts audited for any tax year or years and furnish the report of such audit as required under section 63, he shall be liable to pay by way of fee,–– (i) a sum of Rs 75,000 for a delay up to one month for which such failure continues; and (ii) a sum of Rs 15,0000 thereafter," the Budget, presented by finance minister Nirmala Sitharaman in the Lok Sabha on February 1, says.

If taxpayers fail to get their accounts audited and do not furnish the audited report, they will have to pay Rs 75,000 for a delay of up to a month for which such failure continues, and a fee of Rs 1,50,000 for any period of delay thereafter.

Mihir Tanna, Associate Director of Direct Tax at SK Patodia & Associate LLP, said, "It is a broader move away from punitive action in non-fraud/technical cases. Honest taxpayers will have better opportunities to fix filings. Fees are predictable—taxpayers know in advance what they will pay for delays. Replacing discretionary penalties with fixed fees standardises compliance costs and reduces disputes."

Subsections 427 and 428 of the Finance Bill makes changes to penalties and fee for income-tax compliance.

According to section 428, if a person who is required to file a return of income under section 263 fails to do so by the due date specified in that section, he shall be required to pay a fee of Rs 1,000 if his total income does not exceed Rs 5 lakh and Rs 5,000 in any other case.

Similarly, if a person files a return of income under section 263(5) after nine months from the end of the relevant tax year, the same fee shall apply, that is, Rs 1,000 where the total income does not exceed Rs 5 lakh and Rs 5,000 where the total income is more than ₹5 lakh, per the Finance Bill 2026.

As per section 427, without prejudice to the provisions of this Act, if any person fails to submit, or ensure the submission of, a statement required under section 397(3)(b) within the prescribed time, he shall be liable to pay a fee of Rs 200 for each day the failure continues.

However, this fee shall not exceed the amount of tax that is required to be deducted or collected and must be paid before the statement is submitted.

If a person who is required to furnish a statement of financial transaction or a reportable account under section 508(1) fails to do so within the time prescribed under section 508(2), he shall be liable to pay a fee of Rs 200 per day for the period of default, subject to a maximum limit of Rs 1 lakh, the finance bill says.