Failure to get the Accounts audited under section 63 of the Income Tax Act 2025

In the Finance Bill 2026, emphasis has been placed on converting penalties into graded fee. In this context, section 446 of the Income Tax Act 2025 has been substituted and re-arranged in the proposed section 428(c). Earlier, the section 446 states as follows: –

If any person fails to get his accounts audited for any tax year or years or furnish the audit report as required under section 63, the Assessing Officer may impose a penalty on such person, which shall be the lesser of––

(a) 0.5% of the total sales, turnover, or gross receipts in business, or the gross receipts in profession for such tax year or years; or

(b) ₹150000.

The current section is facsimile to section 271B of the Income Tax Act 1961. Now, in the Finance Bill 2026, the provision regarding the failure to get the Accounts audited under section 63 of the Income tax act 2025 has been changed, re-arranged in section 428(c) and it reads as follows:

fails to get his accounts audited for any tax year or years and furnish the report of such audit as required under section 63, he shall be liable to pay by way of fee,––

(i) a sum of ₹ 75000 for a delay up to one month for which such failure continues; and

(ii) a sum of ₹ 150000 thereafter;

By reading the proposed section, it is absolutely clear that the Government is proposing to take out this particular non-compliance from the imposition of penalty prospective and including this in the fee structure. In this proposed section, there is a welcoming step regarding the timing of the delay in the filing of the Tax Audit Report which states as under:-

The said amendment will take effect from 1^st April 2026 i.e. Tax year 2026-27 and subsequent tax years.

Let’s understand the provisions with the help of suitable example:-

Mr. A is required to get his accounts audited under section 63 of the Tax year 2026-27. Suppose, he gets his accounts audited on the following dates, then let’s calculate the late fee leviable on him.