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Interest Imposed by the IT Department – Section 234A

Updated on: May 2nd, 2024

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2 min read

The Income Tax Act has laid down due date provisions to comply with the filing of the return of income in every assessment year under Section 139. 

Unlike before, if you delay or miss the filing there are some legal repercussions. Not complying with Income Tax regulations often comes with strict consequences like having to pay interest based on Section 234 of the Income Tax Act.

Types of Interest

There are 3 different interest under section 234 :

ClearTax will walk you through the interest and the calculations in a  3-part series.

Introduction to Section 234A – Interest for Default in Filing Tax Return

Income Tax Returns for a financial year need to be filed within the time limit prescribed for each year for you. Your failure to file a return within this prescribed time or not file at all will attract this Interest. Use ClearTax to e-File if you haven’t e-Filed yet.

Now, when you do not file your returns or miss the due date, you could be in one of these 3 distinct positions:

  • You have taxes outstanding to be paid to the IT department
  • You are eligible for a tax refund from the IT department
  • Your taxes have been paid on time with no refund expected or taxes payable.

If you fall into buckets “2” or “3”, you do not have to worry too much about late filing of your tax returns as interest may not be applicable in these two scenarios. However, your Assessing Officer may still choose to charge some interest if he thinks it necessary.

If you have unpaid taxes that are outstanding and you have not filed your returns by the due date, you are in for trouble. You will be charged an interest amount of 1% per month or part of the month (simple interest) on the tax amount outstanding. This interest will be calculated from the due date applicable to you for filing of return of the relevant financial year till the date that you actually file your return.

Interest on late filing ITR -Section 234A

Illustration

Say, your total tax outstanding for F.Y 2023-24 is Rs 1 lakh (net of advance tax paid & TDS if any) and you file your return on the 31st December, 2024  instead of 31st July 2024, the due date to file income tax return for FY 2023-24. 

You are now 5 months late in your tax payments. Interest = 100,000 x 1% x 5 = Rs. 5,000 This Rs. 5,000 is over and above the tax amount that you will be paying in any case. 

Click here to go to Part II

Related Articles

Interest Imposed by the IT Department on delay of advance tax payment – Section 234B

Interest Imposed by the IT Department on default of advance tax – Section 234C

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Frequently Asked Questions

What is the consequence of delay/non-payment of Income tax?

There are some interests that are urged upon the taxpayer in case there is a delay/non-payment of Income tax. The interest penalty is calculated under sections 234A, 234B and 234C of the Income Tax Act.

How is the interest penalty calculated under Section 234A?

Interest Penalty = Balance tax payable while filing ITR X 1% X Number of month(s). The number of months shall be months that are delayed from the due date, where a fraction of a month is considered a full month. For example, if you are 4 months 10 days late, the interest will be charged for 5 months.

Does section 234A apply in case of refund?

Yes, even in case of refund there will be interest calculated under section 234A.

Are there any exemptions or thresholds for the application of Section 234A?

No, Section 234A applies to all taxpayers who file their returns after the due date, regardless of their tax liability.

Is there a grace period for filing returns without incurring interest under Section 234A?

No, there is no grace period. Interest under Section 234A is applicable from the day following the due date until the actual date of filing.

Does Section 234A apply to all types of taxpayers?

Yes, Section 234A is applicable to all categories of taxpayers, including individuals, HUFs (Hindu Undivided Families), and businesses.

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