The Income Tax Department expects taxable persons (assessees) to file their Income-tax Returns on or before the notified due dates. In case the assessees fail to file their Income Tax Returns within the prescribed due dates, they will be liable to pay interest for the delay. This interest is charged under Section 234A of the Income Tax Act. In this article, we will elaborate on the provisions of Section 234A:
If an assessee:
- Submits his/her Income Tax Returns after the notified due date; or
- Does not furnish his/her Income Tax Returns when required
he/she will be liable to pay interest u/s 243A.
Note: Here, Income Tax Return means returns for any Assessment Year (AY) under/in:
- Sub-section (1) of section 139 or
- Sub-section (4) of section 139 or
- Response to a notice under sub-section (1) of section 142.
In case the assessee fails to file returns under any of the sections mentioned above, within the prescribed time frame, he/she will be liable to pay simple interest at the rate of 1% for every month (or part of a month) delayed. The period of delay will be calculated from the date immediately following the due date (the day immediately after the due date).
This interest will be calculated on the amount of the Income Tax payable after deducting the:
- Advance tax paid (if any),
- Tax deducted/collected at source (if available),
- Relief of tax available under section 89,
- Relief allowed under section 90 for tax paid in a country outside India,
- Relief allowed under section 90A for tax paid in a specified territory outside India,
- Allowed amounts under section 91 on account of tax paid in a country outside India; and
- Tax credit that is allowed to be set off in accordance with the provisions of section 115JAA or section 115JD.
- In case an assessee does not have any tax payable, interest u/s 234A will not be levied. This is because the interest u/s 234A is calculated on the tax payable and when the tax payable is ‘0’ the interest payable will also be ‘0’.
- For calculation of interest u/s 234A, the income tax payable will not include any additional income-tax payable (under section 143).
- The amount of tax, penalty or other sums in respect of which interest is to be calculated should be rounded off to the nearest multiple of INR 100.
- For calculation of interest u/s 234A, a fraction of a month should be considered as a full month.
Let us assume that Mr A filed his Income Tax Returns for FY 2018-19 on 25 March 2020.
The due date to file returns for Mr A was 31 August 2019.
|Tax Payable (After Advance Tax and TDS)||INR 2,45,000|
|Delay period (in months)||7 months||The period between 1 September 2020 to 25 March 2020 is considered. Though he filed the returns on 25 March, the part of the month will be regarded as a full month for interest calculation.|
|Interest u/s 234A||INR 17,150||2,45,000*1%*7|