Signalling a tougher stance on tax compliance, the Centre has proposed stringent penalties for audit-related delays under the Finance Bill 2026. The proposed changes seek to replace the existing discretionary penalty framework with a fixed, graded fee system, making even minor delays financially costly for taxpayers.
The new provisions are scheduled to come into effect from April 1, 2026, and will apply from the assessment year 2026–27 onwards.
₹75,000 Penalty for Audit Delay
Under provisions proposed in the Bill, audit compliance has been given priority. If a taxpayer fails to complete an audit or submit the audit report within the prescribed deadline, a minimum penalty of ₹75,000 will be levied. Notably, this fee will apply even if the delay is as short as one day.
In cases where the delay extends beyond 30 days, the penalty is proposed to increase to ₹1.5 lakh, leaving little scope for leniency in audit timelines.
Accountant’s Report Also Under Stricter Norms
The Bill also proposes tighter penalties for delays in submitting an accountant’s report. Failure to file the report within the stipulated time could attract a ₹50,000 fee for the initial period, which may increase to ₹1 lakh if the delay continues.
Tax experts note that these provisions will particularly impact businesses and professionals for whom statutory audits and professional certifications are mandatory.
Limited Relief for Small Taxpayers
While audit-related penalties have been significantly tightened, the government has proposed caps on late fees for income tax return filings by individual taxpayers. For those with a total income of up to ₹5 lakh, the maximum late fee has been limited to ₹1,000, while for others it has been capped at ₹5,000.
Officials have stated that the revised structure aims to bring clarity and predictability to penalties, reducing ambiguity while encouraging timely compliance.
Clear Signal on Compliance
The Finance Bill 2026 underscores the government’s intent to enforce stricter discipline in tax administration. With fixed penalties replacing discretionary assessments, experts advise taxpayers—especially businesses and professionals—to review compliance systems well ahead of the new regime’s implementation.
