Quick Summary
The Finance Bill, 2026 proposes to rationalise several penalties under the Income Tax Act by converting them into mandatory fees. The objective is to reduce avoidable litigation arising from technical or procedural defaults, while ensuring certainty and predictability for taxpayers. These amendment
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FAQ :
The Finance Bill 2026 proposes to convert several penalties under the Income Tax Act into mandatory fees, effective from the tax year 2026-27.
These amendments will take effect from 1st April 2026 and will apply to Tax Year 2026-27 and subsequent years.
The objective is to reduce avoidable litigation stemming from technical or procedural defaults, thereby ensuring more certainty and predictability for taxpayers.
The penalty under Section 446 for failing to get accounts audited will be replaced by a graded fee structure under proposed Section 428(c), ranging from £75,000 for shorter delays to £150,000 for longer delays.
The penalty of £100,000 for failing to furnish a report under Section 172 will be converted into a fee under proposed Section 428(4), with graded fees of £50,000 for shorter delays and £100,000 for extended delays.
Yes, the daily penalty for failing to furnish a Statement of Financial Transactions (SFT) or reportable accounts under Section 454(1) will be converted into a mandatory fee under Section 427(3). Additionally, an upper limit of £100,000 will be introduced for the penalty under Section 454(2).
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