Delay in filing of return attracts penalty of 5% of the tax for each 15 days period. Late payment of tax attracts penalty of 0.15% of the amount of the tax due for each day of delay, up to a maximum of 365 days. In case taxpayer fails to keep proper books of accounts, incorrectly prepares returns etc., he is liable to a penalty of 10% of the reduced amount of tax due to such violation. For underreporting of taxable income, penalty equals to 50% of underreported amount and for over reporting of losses, penalty equals to 20% of over reported losses are due.
Total amount of penalty cannot exceed amount of principal tax liability.