Tax Audit Penalty: Section 271B Amount, Relief & Due Date
Calculate the maximum penalty for a missed tax audit, understand when reasonable-cause relief can apply, and separate Section 271B from late ITR fees, updated-return additional tax and TDS defaults.
The penalty is capped, but it is not automatic
For failure to obtain or furnish a tax audit report required under Section 44AB, the Assessing Officer may levy the lower of 0.5% of turnover or gross receipts and ₹1,50,000. Section 273B protects a taxpayer who proves reasonable cause.
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What is the tax audit penalty under Section 271B?
If a person who was required to get accounts audited under Section 44AB fails to obtain the audit or furnish the prescribed report on time, the Assessing Officer may impose a penalty equal to 0.5% of total sales, turnover or gross receipts, subject to a maximum of ₹1,50,000.
The word “may” matters. A computed figure is not an instant portal charge or an automatic demand. Before a penalty is imposed, the taxpayer must receive an opportunity to be heard. If the taxpayer proves a reasonable cause for the failure, Section 273B says the Section 271B penalty should not be imposed.
Completing the tax audit late does not erase the original delay, but prompt completion can strengthen the factual record and reduce continuing return-filing problems.
Who can face a penalty for failure to get accounts audited?
Section 271B applies only when the tax audit requirement itself existed. Start by checking Section 44AB for the relevant year, the taxpayer's business or professional receipts, the applicable threshold, cash-receipt and cash-payment conditions, and any presumptive-tax rule that changes the audit position.
Turnover-based audit
Businesses crossing the applicable Section 44AB threshold may need a tax audit. The higher cash-light threshold must be tested carefully against both receipt and payment conditions.
Check turnover and cash testsGross-receipt audit
Specified professionals crossing the statutory gross-receipt threshold may need an audit. Professional receipts, reimbursements and related records should be classified consistently.
Check gross receiptsPresumptive taxation can alter the answer
A person declaring income below a presumptive benchmark may need an audit if the connected statutory conditions are met. Do not calculate a penalty from turnover alone; first confirm whether Section 44AB applied to that exact assessment year.
If the tax audit provision did not apply on the correct facts and thresholds, Section 271B should not apply. Support this position with the return, books, turnover reconciliation and banking data.
Tax audit penalty calculator
Enter the relevant total sales, turnover or gross receipts. The calculator compares 0.5% with ₹1,50,000 and displays the lower figure.
Enter turnover or gross receipts
Use the figure applicable to the Section 44AB audit requirement for the relevant period.
Formula: lower of 0.5% of the entered amount and ₹1,50,000.
This is the statutory formula, not a final penalty order. Applicability and reasonable-cause relief must still be examined.
The Assessing Officer initiates and decides penalty proceedings. Section 273B relief and the evidence filed in response can be decisive.
Section 271B penalty calculation examples
| Turnover or gross receipts | 0.5% calculation | ₹1.5 lakh cap | Maximum penalty under formula |
|---|---|---|---|
| ₹10 lakh | ₹5,000 | ₹1,50,000 | ₹5,000 |
| ₹50 lakh | ₹25,000 | ₹1,50,000 | ₹25,000 |
| ₹1 crore | ₹50,000 | ₹1,50,000 | ₹50,000 |
| ₹3 crore | ₹1,50,000 | ₹1,50,000 | ₹1,50,000 |
| ₹10 crore | ₹5,00,000 | ₹1,50,000 | ₹1,50,000 |
The cap begins to control once 0.5% reaches ₹1,50,000, which occurs at ₹3 crore. Above that figure, the formula remains capped at ₹1,50,000 for the relevant Section 271B failure.
Tax audit due date and late filing position for AY 2026-27
For an ordinary audit case that is not a specified transfer-pricing case, the tax audit report for FY 2025-26 / AY 2026-27 is ordinarily due on 30 September 2026. The corresponding income-tax return is ordinarily due on 31 October 2026.
| Compliance | Period | Ordinary due date | Risk if missed |
|---|---|---|---|
| Tax audit report | FY 2025-26 / AY 2026-27 | 30 September 2026 | Section 271B proceedings may follow |
| Income-tax return for audit case | AY 2026-27 | 31 October 2026 | Section 234F fee, interest and other consequences may apply |
| Transfer-pricing audit report | Specified cases | 31 October 2026 | Separate report and penalty provisions require review |
| Return in transfer-pricing case | Specified cases | 30 November 2026 | Late-return consequences may apply |
Professional representations and extension requests do not change a statutory deadline. Confirm the latest CBDT order before relying on any extension report.
Follow CompanyJi's AY 2026-27 tax audit due-date update for the verified position.
How to avoid a tax audit penalty with reasonable cause
Section 273B provides that no penalty is imposable under Section 271B if the taxpayer proves a reasonable cause for the failure. This is not a blanket waiver. The explanation must be specific, credible and supported by evidence showing how the event prevented timely compliance.
Resignation, death or serious incapacity may be relevant when the timeline and replacement efforts are documented.
Keep correspondence and datesSeizure, disaster, verified data loss or another exceptional event may be relevant if the impact is directly proved.
Preserve official recordsA bona fide dispute about audit applicability may matter where the position was responsibly examined and consistently documented.
Prepare a legal noteCompleting the audit as soon as the obstacle ends helps establish good faith, though late completion alone does not guarantee relief.
Show remedial actionReasons that are usually weak without stronger evidence
General workload, ignorance of the law, waiting until the last few days, internal coordination problems or merely blaming an accountant may not establish reasonable cause by themselves. The response should connect the event, the affected records, the period of delay and the remedial steps.
Build a date-wise chronology before drafting the legal explanation. Every important sentence should point to a document, email, portal record, medical record, police report, system ticket or other contemporaneous evidence.
How to reply to a Section 271B penalty notice
Confirm the assessment year, section, proposed default, response date and whether a hearing is offered.
Recheck turnover, gross receipts, cash conditions, presumptive provisions and the law for that period.
Compare 0.5% of the correct base with ₹1,50,000 and identify any arithmetic error in the notice.
Show when the audit began, what caused delay, how long the obstacle lasted and when compliance was completed.
Attach documents that prove each material fact and expressly request Section 273B relief where applicable.
Answer follow-up questions, preserve acknowledgement and review appeal options if an adverse order is passed.
For a demand or show-cause communication, CompanyJi's income-tax notice reply service can help organise the facts, evidence and response.
Tax audit penalty vs late ITR, updated return and TDS penalty
These consequences arise under different provisions. Paying one fee does not automatically settle another default.
| Default | Provision | Amount or rate | Important distinction |
|---|---|---|---|
| Tax audit not obtained or report not furnished | Section 271B | Lower of 0.5% of turnover or receipts and ₹1,50,000 | Reasonable-cause relief may apply under Section 273B |
| Late income-tax return | Section 234F | ₹5,000; reduced to ₹1,000 where total income does not exceed ₹5 lakh | A filing fee, separate from the audit penalty |
| Updated return | Section 140B framework | Additional tax at 25%, 50%, 60% or 70% depending on delay | Calculated on aggregate tax and interest; not a flat “updated return penalty” |
| Late TDS statement | Section 234E | ₹200 per day, capped at the TDS amount | Fee continues with delay until the cap is reached |
| TDS statement failure or inaccuracy | Section 271H | ₹10,000 to ₹1,00,000 | May apply in addition to Section 234E, subject to statutory relief conditions |
| Transfer-pricing report not furnished | Section 271BA | ₹1,00,000 | Separate from the ordinary Section 271B report default |
Late income tax return penalty for AY 2026-27
The commonly searched “penalty for late filing of ITR” is technically a fee under Section 234F. For AY 2026-27 it is ₹5,000, or ₹1,000 where total income does not exceed ₹5 lakh. Interest, loss carry-forward restrictions and other return consequences may also arise. Use CompanyJi's income-tax filing service to review the full position.
Updated return penalty: the correct treatment
An updated return generally carries additional income tax instead of one flat penalty. The rate is 25% when filed within 12 months from the end of the relevant assessment year, 50% in the next 12 months, 60% in the third year and 70% in the fourth year, applied to aggregate tax and interest as prescribed.
TDS penalty and late filing fees
A delayed TDS statement can attract a Section 234E fee of ₹200 per day, limited to the TDS amount, while Section 271H can add a penalty from ₹10,000 to ₹1,00,000 in applicable cases. Deposit interest and statement defaults should be calculated separately. The TDS interest calculator helps estimate late deduction or late payment interest.
Tax audit penalty under the Income Tax Act, 2025
AY 2026-27 proceedings continue under the Income-tax Act, 1961. For Tax Year 2026-27 onward, the Income Tax Act, 2025 reorganises the provisions. Section 446 carries the penalty for failure to comply with the tax audit requirement in Section 63.
Section 271B
Income-tax Act, 1961
- Audit requirement in Section 44AB
- 0.5% of turnover or receipts
- ₹1,50,000 maximum
- Reasonable-cause protection in Section 273B
Section 446
Income Tax Act, 2025
- Audit requirement in Section 63
- 0.5% of turnover or receipts
- ₹1,50,000 maximum
- Use the new Act procedure for the period
The section number changes under the new Act, but the lower-of formula remains 0.5% of sales, turnover or gross receipts or ₹1,50,000.
Documents to keep for a tax audit penalty response
Common mistakes that weaken the response
Using the wrong turnover figure, submitting a generic explanation, omitting evidence, missing the notice deadline, assuming the ₹1.5 lakh amount is automatic, or confusing late ITR fees with the audit penalty can all weaken the case.
Calculate the Section 271B ceiling accurately, but do not stop at the number. Confirm that the audit applied, complete the delayed compliance, build a dated evidence file and present any reasonable cause clearly within the notice timeline.
Sources reviewed for this guide
The legal rules and figures were checked against official Income Tax Department material available on 24 September 2026.
Tax audit penalty FAQs
What is the penalty for not filing a tax audit report?
Under Section 271B, the Assessing Officer may impose the lower of 0.5% of total sales, turnover or gross receipts and ₹1,50,000.
What is the maximum Section 271B penalty?
The statutory maximum is ₹1,50,000 for the relevant failure, subject to the facts, the penalty process and reasonable-cause relief.
Is the tax audit penalty automatic?
No. The Assessing Officer may initiate penalty proceedings, the taxpayer must get an opportunity to respond, and Section 273B relief may apply.
Can reasonable cause prevent a Section 271B penalty?
Yes. The taxpayer must prove a reasonable cause with evidence that explains the failure and its duration.
What is the tax audit due date for AY 2026-27?
The ordinary due date is 30 September 2026 for a non-transfer-pricing audit case, unless a valid later CBDT order changes it.
Does paying the late ITR fee remove the audit penalty?
No. Section 234F and Section 271B address separate defaults and can apply independently.
What is the late ITR filing fee for AY 2026-27?
It is ₹5,000, reduced to ₹1,000 where total income does not exceed ₹5 lakh, subject to the return being otherwise permitted.
What is the updated return penalty?
An updated return generally attracts additional tax at 25%, 50%, 60% or 70% depending on the filing window, rather than one flat penalty.
What are the TDS late filing consequences?
Section 234E can charge ₹200 per day, capped at the TDS amount, and Section 271H can impose ₹10,000 to ₹1,00,000 in applicable cases.
What changes under the Income Tax Act, 2025?
Section 446 carries forward the same lower-of formula for Tax Year 2026-27 onward: 0.5% of turnover or receipts or ₹1,50,000.
Respond with the facts, not just the penalty figure
Share the notice, books, turnover reconciliation, audit report and delay chronology. CompanyJi Private Limited can help check applicability, calculate the statutory exposure and prepare an evidence-led response.
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