Not complying with Income Tax regulations often comes with strict repercussions. You will have to pay Interest based on the Section 234 of the Income Tax Act.
- Default in filing of Tax Returns – Section 234A
- Default in payment of Advance Tax – Section 234B
- Deferment of Advance Tax – Section 234C
ClearTax will walk you through the interest and the calculations in a 3 part series.
Part I: Section 234 A
(Interest for Default in Filing your 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 perfectly paid with no refund expected or taxes payable.
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 (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 applicable year till the date that you actually file your return.