The central government has indicated it will further tighten tax regulations through the Finance Bill 2026. Negligence, especially in audit-related matters, could now prove costly.
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Tax Audit Penalty: The Central Government has indicated further tightening of tax regulations through the Finance Bill 2026. Negligence, especially in audit-related matters, could now prove costly. Under the new proposal, hefty fines will be imposed for failing to submit audit reports or accountant’s reports on time. The government has decided to replace the discretionary penalty system with a fixed and “graded fee” system. These new rules will come into effect from April 1, 2026, and will be effective from the tax year 2026-27. Let’s explore the full story in detail.
Delays will attract a penalty of 75,000 rupees
Under Section 428 and Section 63 proposed in the Finance Bill, audit compliance has been prioritized. If a taxpayer fails to get their accounts audited or file an audit report on time, they will be fined at least 75,000 rupees. Notably, even a delay of just one day will result in a fee of 75,000 rupees. However, if the delay lasts more than 30 days, the fine will increase to ₹150,000. This means there’s no room for “it’s too late.”
Heavy Penalties for Delays in Accountant Reports
Section 172 also imposes strict penalties for failure to submit accountant reports on time. Failure to file a taxpayer’s accountant report will result in a fee of ₹50,000 for the first month. If the delay continues, this penalty will increase to ₹1 lakh. The government’s clear message is that the habit of taking audits and professional reports lightly must be abandoned. This rule will particularly affect businesses and professionals for whom audits are mandatory.
No room for laxity in tax compliance
However, some relief has been provided to ordinary taxpayers. The fee for late filing of income tax returns has been capped. For those with a total income of up to ₹5 lakh, this fee will be a maximum of ₹1,000. In other cases, the maximum fee is ₹5,000. The government says that this new system will provide clearer understanding of the rules for taxpayers. Overall, the Finance Bill 2026 makes it clear that there is no room for laxity in tax compliance.
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