Income Tax Penalty - New Section 270(a) of Income Tax Act

Starting April 1, 2017, Income tax penalty for under reporting and misreporting of the income will be handled by section 270(A) of the Income tax act. This section is newly added amendment of the income tax act. Please note that this is only valid for returns for years AY 2017-18 and after that.

Before April 1, 2017, income tax penalty for under reporting was handled by section 271 of income tax. This section will no more apply for this calculating penalty of under-reporting and misreporting of income.

Section 270A of Income Tax Act for Under Reported Income

After section 270 of the Income-tax Act [as it stood immediately before its omission by section 105 of the Direct Tax Laws (Amendment) Act, 1987], the following section shall be inserted with effect from the 1st day of April, 2017, namely:—
'270A. Penalty for under reporting and misreporting of income.—(1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.

Section 270A - Calculation of Under Reported income

As per section 270(a) of the income tax, under-reported income is calculated as per the following formula.

Under-reported Income = (A — B) + (C — D)

where,

• A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions)

• B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income

• C= the total income assessed as per the provisions contained in section 115JB or section 115JC;

• D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under-reported income:

Section 270A - Income tax Penalty

As per the section 270A of income tax act - "The penalty shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income."

So effective income tax penalty is 50% of the tax payable on under reported income.