Budget 2026-27: Misreporting Penalty Overhauled, Immunity Expanded

• Budget 2026-27 introduces significant changes to the misreporting penalty framework, aiming to boost voluntary tax compliance.
• The existing system differentiates between underreporting (50% penalty) and misreporting (200% penalty).
• Immunity from penalty and prosecution is now extended to misreporting cases, provided specific payment conditions are met.
• Standard misreporting cases require an additional 100% of the tax amount for immunity, while unexplained income cases need 120%.
• The base tax rate on special incomes like unexplained investments and cash credits has been reduced from 60% to 30%.

Why It Matters: Budget 2026-27 simplifies tax compliance by expanding immunity for misreporting and reducing tax on special incomes.