Ans. The compounding fees shall depend on various factors, such as the nature & occasion of the offence, period of default, outstanding tax liability, etc. An overview of the compounding fees is given in the below table:
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Nature of default
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Compounding fees
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Fraudulent removal, concealment, transfer or delivery of property under Section 276
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75% of the outstanding recovery amount sought to be thwarted
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Failure to pay tax deducted or collected at source
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On the first occasion
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2%-3% per month (or part of the month) of the tax in default
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On subsequent occasion
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5% per month (or part of the month) of the amount of tax in default
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Note: The compounding fee shall not exceed the TDS or TCS amount in default, and the period of default shall be calculated from the date of deduction to the date of deposit of TDS or TCS.
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Wilful attempt to evade tax under Section 276C(1)
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Cases involving tax sought to be evaded
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125%-150% of tax sought to be evaded
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Cases involving penalty sought to be evaded
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100% of penalty sought to be evaded
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Wilful attempt to evade tax, interest and penalty under Section 276C2)
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3% per month (or part of the month) of the amount of tax, interest and penalty sought to be evaded
Note: The compounding fee shall not exceed the amount of tax, interest and penalty sought to be evaded.
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Failure to furnish return of income or reply to notice
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Failure to furnish return of income by due date
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Rs. 2,000 - Rs. 4,000 per day
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Failure to comply with notice for enquiry
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Rs. 2,000 – Rs. 5,000 per day
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Failure to comply with notice for income escaping assessment
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Rs. 2,000 – Rs. 5,000 per day
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Failure to comply with the notice under Section 153A/ 153C
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Rs. 2,000 – Rs. 5,000 per day
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False statement in verification or abetment of a false return
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Depends on the amount of tax which would have been evaded subject to a minimum of Rs. 1 lakh
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Falsification of books of account or document
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100% of the sum equal to the aggregate amount of false or omitted entry involved
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Compounding fee from co-accused or abettor
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10% of the 'compounding fee for the main offence'
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Any other offence
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Depends on the nature and magnitude of the offence and loss of revenue attributable to such offence subject to Minimum of Rs. 1 lakh
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