Long term capital gain tax penalty

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 December 2012 NRI friend hasn't paid taxes for a long-term-capital gain that took place in 2009-2010.

1)Can late-payment penalty be waived under some circumstances? Like being out of country and not having paperwork etc?
1)Is there a maximum penalty that will be imposed or does it keep adding up at 1% per month rate?

@VaibhavJ

@VaibhavJ (Expert)
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28 December 2012 Hi

Consequences for Non Deduction

As with other TDS defaults the consequences for Non deduction may be broadly classified as follows

1) Simple Interest at 12 % p a u/s 201A (which is on a month to month basis after the Finance Act 2007)

2) Penalties for non deduction (u/s 271C) and failure to pay the deducted tax to the government (u/s 221)

3)Prosecution u/s 276B.

Thanks!!

Querist : Anonymous

Querist : Anonymous (Querist)

28 December 2012 You haven't answered 1). Especially since he was planning to reinvent the gain in another plot, but things could not get materialized.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 For an NRI who hasn't paid taxes on a Long-Term Capital Gain (LTCG) that took place in the financial year 2009-2010, there are specific guidelines regarding penalties for late payment. Here’s how you can approach this situation:

### 1. **Late Payment Penalty**

#### **Penalty for Late Filing**

- **Interest on Late Payment**: Under Section 234A of the Income Tax Act, interest is charged at 1% per month on the amount of unpaid tax from the due date of filing until the date of payment. This continues to accumulate until the tax is paid.

- **Late Fee under Section 234F**: For returns filed after the due date, a late fee is applicable under Section 234F, which is ₹5,000 if the return is filed before December 31st of the assessment year and ₹10,000 if filed thereafter. This section is applicable starting from the assessment year 2018-19 onwards, so it might not apply to your case if it pertains to 2009-10.

#### **Waiver of Penalty**

- **Reasonable Cause**: Under Section 273B, the penalty for late payment may be waived if the taxpayer can prove that there was a reasonable cause for not paying the tax on time. Being out of the country and not having paperwork could be considered reasonable causes, but it would need to be substantiated with proper documentation and proof.

- **Request for Waiver**: The taxpayer should file an application with the Income Tax Department explaining the reasons for the delay, along with any supporting documents. The final decision on the waiver will be at the discretion of the assessing officer.

### 2. **Maximum Penalty**

- **Accumulation of Interest**: Interest under Section 234A continues to accumulate at 1% per month on the unpaid tax amount until the tax is paid. There is no cap on this interest, and it will keep adding up as long as the tax remains unpaid.

- **Penalties**: The penalty does not have a fixed upper limit but is based on the amount of unpaid tax and the duration of the delay. It’s important to pay the tax as soon as possible to minimize the amount of interest accrued.

### 3. **Steps to Take**

1. **Calculate Total Dues**: Compute the total amount of unpaid tax along with interest under Section 234A.

2. **File Tax Return**: File the return for the relevant assessment year as soon as possible to determine the exact amount of tax due.

3. **Pay the Tax**: Pay the total tax due along with accrued interest.

4. **Apply for Waiver**: If you believe there is a valid reason for the delay, file an application for the waiver of penalties and interest with the Income Tax Department.

5. **Consult a Tax Advisor**: Given the complexity and potential for significant penalties, it is advisable to consult a tax advisor or legal expert to navigate this process and ensure compliance with tax laws.

### Example Calculation of Interest

If, for instance, the unpaid tax amount was ₹1,00,000, and the payment was delayed by 12 months:

\[
\text{Interest} = 1\% \times 1,00,000 \times 12 = ₹12,000
\]

In addition to this, if any late fee under Section 234F (if applicable) is due, it would be added.

### Conclusion

The penalty for late payment of taxes can be significant due to the continuous accumulation of interest. A request for a waiver might be considered based on the circumstances, but it is crucial to address the issue promptly and consult with a tax professional for guidance tailored to your specific situation.