234A
Section 234A: Interest on Late Filing of Income Tax Returns
In this post, we will discuss Section 234A of the Income Tax Act, which deals with the interest charged for late filing of income tax returns. We’ll explain how this interest is calculated, who it affects, and what you can do to avoid extra penalties. Filing your taxes on time is key to preventing these additional costs, so let’s dive into the details of Section 234A:
What is Section 234A of the Income Tax Act?
Section 234A of the Income Tax Act in India deals with the interest charged for late filing of income tax returns. Here’s a simplified breakdown:
- Late Filing: If you miss the deadline for filing your income tax return, you may need to pay interest under Section 234A.
- Interest Rate: The interest is calculated at 1% per month or part of the month on any unpaid tax. This interest keeps adding up for each month of delay.
- Who it Affects: This applies when there’s tax still due at the time of filing. If all your taxes are paid on time, Section 234A may not apply.
- Exceptions: If you owe no tax or have already cleared all payments before the deadline, Section 234A won’t affect you. However, filing your return on time is still important to avoid other penalties.
- Penalties: In addition to interest, you might face penalties for missing the deadline, depending on your specific situation.
When will interest u/s 234A be levied?
Interest under Section 234A applies if you miss the due date for filing your ITR and have unpaid taxes. For the assessment year 2023-24, the due date for non-tax audit cases is July 31 2023. If you file after this date with pending taxes, interest will be charged starting from August 1 2023 until the taxes are fully paid.
Rate of Interest applicable u/s 234A
Interest is charged at 1% per month or for any part of a month. It’s calculated as simple interest.
Interest payable in section 234a
If you delay filing your Income Tax Return (ITR), you will have to pay interest at 1% per month on the pending tax amount. This interest is charged from the day after the due date till the date you actually file your return. There are two situations in this case:
a. When no tax refund is claimed
If you have not claimed any tax refund, you need to pay interest on the full outstanding tax amount.
Example:
Mr. Prakesh was supposed to file his ITR by 31st July 2018 but filed it in February 2019 for the financial year 2017-18. His outstanding tax amount was Rs. 2,50,000. Since he delayed his filing by 7 months (August to February), interest will be charged for 7 months.
Interest payable = 2,50,000 × 1% × 7 = Rs. 17,500
So, Mr. Prakesh has to pay Rs. 17,500 as interest under Section 234A for the delay.
b. When tax refund is claimed
If you are eligible for a tax refund but still file your return late, interest will be charged only on the balance amount after adjusting the refund.
Example:
Mr. Rohit filed his ITR in February 2019. He was eligible for a tax refund of Rs. 40,000, and his outstanding tax was Rs. 1,50,000. The net outstanding tax after adjusting the refund is Rs. 1,10,000 (1,50,000 – 40,000).
Interest payable = 1,10,000 × 1% × 7 = Rs. 7,700
So, Mr. Rohit will have to pay Rs. 7,700 as interest for the delay under Section 234A.
Calculation of Interest u/s 234
Let’s say an individual has an outstanding tax of Rs. 1 lakh for the financial year 2017-18 (after accounting for TDS and any advance tax). The due date for filing the Income Tax Return (ITR) is August 31, 2018, but the person files it late, on March 31, 2019. This means they are 7 months late in filing.
As a result, they will incur interest at the rate of 1% per month for the delay:
Interest = 1,00,000 x 1% x 7 = Rs. 7,000
This means the person will have to pay an additional Rs. 7,000 along with the tax due.
If someone doesn’t file their ITR, the 1% monthly interest will continue accumulating until the assessment year ends on March 31.
Penalties under section 234
Penalties under this section, also known as defaults in furnishing income, apply in the following cases:
- When you do not pay your taxes on time.
- When you forget to submit Form 16 to your new employer after switching jobs.
- When you fail to follow income tax rules properly.
If any of these happen, you will have to pay interest under the following sections:
- Section 234A: For late filing of your Income Tax Return.
- Section 234B: For delay in paying Advance Tax.
- Section 234C: For paying Advance Tax in instalments later than the due dates.
Exceptions to section 234a
Section 234A usually applies when you file your income tax return late. However, there are some cases where this interest may not be charged:
- Nil tax liability: If you have no tax left to pay because the full amount is already covered through TDS or advance tax, then no interest under Section 234A will be charged, even if your return is filed after the due date.
- Refund cases: If you are eligible for a refund and there is no extra tax to be paid, then filing your return late may not attract any interest under this section.
- Exempted income: If your total income is below the taxable limit and you are not required to file a return, Section 234A will not apply to you.
- CBDT relief or circulars: Sometimes, the Central Board of Direct Taxes (CBDT) may issue special circulars or notifications giving relief by waiving off interest under certain conditions.
key points regarding Section 234A
1, Applicability: This section applies when a taxpayer does not file their income tax return on time and still has some tax to pay by the due date mentioned under Section 139(1) of the Income Tax Act.
2, Interest Calculation: Interest is charged at 1% per month or part of a month on the amount of unpaid tax for the period of delay.
3, Due Date: Usually, the last date to file income tax returns for individuals is July 31st of the assessment year. However, it may change depending on the year, so it is always good to check the exact due date before filing.
Taxpayers should make sure to file their returns on time to avoid paying extra interest under Section 234A. This interest is charged to make up for the delay in tax payment to the government.
We have reached the end of this post. Please share your queries with us in the comment section below.
FAQs
1. How is the 234C interest calculated?
Ans: Advance tax is paid on the following dates during the financial year.
2. What happens if you claim a tax refund?
Ans: The person must file an income tax return and get a refund.
3. Is section 234A applicable in the situation of a refund?
Ans: Yes, while filing an income tax return on time, the person who fails must pay 1% interest every month.
4. What happens if I delay filing my ITR?
Ans: If your gross income exceeds the basic exemption limit, you must file your ITR. If you miss the deadline and have outstanding taxes, you will be charged interest under sections 234A, 234B, and 234C. A fee under Section 234F would also be charged.
