Section 234A: Delayed Filing Of Tax Returns, Due Date, Calculation And Interest Payable
Taxpayers must file for Income Tax Returns (ITR) every Assessment Year. However, if you delay filing Income Tax Returns, you may be liable to pay a penalty under Section 234A of the Income Tax Act. What is the due date for filing ITR and what is the penalty amount? Are there any additional penalties? Keep reading to find out!
Table of contents
- 3 Types of Interests under Section 234 of the Income Tax Act
- Provisions of Section 234A of the Income Tax Act
- Applicability of Interest under Section 234A
- Period of Interest under Section 234A of the Income Tax Act
- How is Interest under Section 234A Calculated?
- Amount of Interest Payable under Section 234A
- Additional Penalties for Not Paying Income Tax on Time
- Points to Remember
- Final Word
- FAQs on Section 234A
3 Types of Interests under Section 234 of the Income Tax Act
Here are the three types of interests under Section 234 of the Income Tax Act:
- Section 234A is applicable if there’s a delay in filing tax returns
- Section 234B is applicable if one delays paying advance tax
- Section 234C will be applicable in case of deferred payment of advance tax
Provisions of Section 234A of the Income Tax Act
The Income Tax Act specifically provides a due date for filing Income Tax Returns. As per Section 234A of the Income Tax Act, simple interest is levied for delay in filing ITR or non-payment. This section is applicable even for filing ITR for an extended period if one’s tax payable exceeds Rs. 1,00,000.
The interest rate is 1% for every month or part of a month, applicable after the due date of filing ITR for the current assessment year (AY). This interest applies to taxable income under regular assessment or the total income under Section 143. You can make the following deductions from taxable income before calculating interest.
- Tax deducted at source (TDS)
- Advance tax (if any)
- Relief of tax allowed under Section 90 for tax paid in India
- The tax credit allowed under Section 115JAA or Section 115JD
- Tax relief under Section 90A for tax paid in a territory (specified) outside India
- Deductions allowed under Section 91 for tax paid abroad
Applicability of Interest under Section 234A
As per Section 234A, interest at the rate of 1% per month or part of a month on the outstanding tax amount is charged from the due date of filing ITR till the date of filing ITR.
This interest is levied for delay in filing the return of income, filing an updated return and filing a return as a response to a notice issued under Section 142.
Period of Interest under Section 234A of the Income Tax Act
Interest under Section 234A is applicable immediately following the due date of filing ITR till the date of furnishing the return of income. When a taxpayer does not file returns, interest is applicable till the date of completion of assessment under Section 144.
It is important to note that a fraction of a month is considered to be a full month when computing the period of interest. Regular taxpayers need to pay any outstanding tax and file ITR before July 31 of the current AY. For taxpayers who need to get their accounts audited, the last date for filing is October 31.
In 2021, the due date of AY21-22 was extended to December 31 2021, for regular taxpayers. The date of filing for belated or revised returns has been extended to March 31 2022, while that of tax audit cases has been extended to February 15 2022.
As per the clarification from CBDT, taxpayers have to pay 1% interest when filing ITR in this extended period under Section 234A. This is applicable despite the fact that many taxpayers could not file tax returns due to glitches on the tax portal.
How is Interest under Section 234A Calculated?
The interest rate for a delay in filing ITR is charged at 1%. The case study given will help illustrate the calculation better:
Suppose your total outstanding tax for the financial year 2018-2019 is Rs. 2 lakh and you file your return on March 31, 2020, instead of August 2019. The calculation will be as follows:
Interest= 2,00,000 x 1% x 7 = Rs. 14,000
Rs. 14,000 is the additional amount that you need to pay as a fine for the delay every month.
Amount of Interest Payable under Section 234A
Under Section 234A of the Income Tax Act, simple interest at a rate of 1% is levied on the payable tax for every month of delay in filing ITR. The interest depends on the net tax payable after adjustments for advance taxes, interest on excess tax, tax reliefs etc.
The following example will demonstrate the calculation of interest:
Mr Patel is an individual taxpayer who filed his ITR on November 10. His tax liability for the financial year was Rs. 30,000, payable on July 31. Moreover, he had paid an advance tax of Rs. 10,000 and has a TDS credit of Rs. 2000.
The advance tax and TDS will be deducted from his tax liability. Hence, his net tax payable is- Rs. 30,000 – 12,000 = 18,000. The interest will be levied over a period of 3 months and 10 days. As the ten days part is considered a full month for taxation, the total period for interest payment will be 4 months.
Interest payable = (Net Tax) x Period x 1% per month = 18,000 x 4 x 1/100 = Rs. 720.
Under Section 234A, he will have to pay a total interest of Rs. 720 for late tax filing.
Additional Penalties for Not Paying Income Tax on Time
Effective from FY18, taxpayers who have filed ITR after the due date have to pay penalties under Section 234F. For filing ITR after July 31 but before December 31, late filing fees of up to Rs. 5000 is applicable. The penalty increases to Rs. 10,000 for filing taxes after December 31.
The Finance Act 2021 revised the fee for default in furnishing tax returns for AY 2021-22 to Rs. 5000 when paid after the due date under Section 139(1). If the assessee’s total annual income is under Rs. 5 lakh, the late payment/default fees is up to Rs. 1000.
Under Section 156, the IT authorities may issue a demand notice to taxpayers for payment of outstanding dues. The maximum period for furnishing returns for this is 30 days or less as per the Assessing Officer’s (AO) decision. The penalty for not paying this amount is treated as a general penalty, which can be up to the total amount of outstanding tax.
Also Read: How To File Income Tax Return Using The New Tax Filing Portal?
Points to Remember
Given below are the points that one needs to remember about Section 234A:
- There are no income tax exemptions under Section 234A
- The government of India may introduce tax exemptions/relaxations for senior citizen taxpayers
Final Word
Taxpayers are given time up to July 31 to pay outstanding taxes and file income tax returns under Section 234A of the Income Tax Act. To avoid such penalties and fines, you should make sure to check your outstanding tax and pay them in time on the Income Tax portal.
FAQs on Section 234A
Ans: Yes, a taxpayer who misreports or under-reports their income to reduce tax liability is liable to penalties under Section 270A. For under-reporting, the penalty is 50% of the tax payable on the under-reported income. In cases where misreporting leads to under-reporting, a 200% penalty is imposed on the tax payable.
Ans: Here are some of the benefits you cannot have for delayed payment of taxes:
> You cannot carry forward losses against future gains.
> If you are entitled to refunds for excess paid taxes, you need to file returns before the due date to receive the refunds.
Ans: If you have failed to file your income tax returns, you can file a belated return. This can be done before the end of the relevant assessment year or before the assessment is completed. For the current AY, the last day to file belated returns is March 31 2022.
Ans: Individuals who have to pay taxes over Rs. 10,000 are liable to pay tax dues in advance under Section 208 of the IT Act. Businessmen, salaried employees and self-employed professionals have to pay 90% of the payable tax by the end of the financial year. Otherwise, they have to pay an interest penalty at a rate of 1%.
Ans: Senior citizens (60 years or older) with no income do not need to pay advance tax under Section 234B. Taxpayers with a turnover of over 8% on a presumptive basis can also enjoy exemption from advance tax.
Ans: Yes, Section 234A is applicable in case of refunds. Income Tax officials charge an interest rate of 1% per month or part of the month.
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