Interest Under Section 234A Delay in Filing Return
Under the Income-tax Act, different types of interests are levied for various kinds of delays and defaults. Section 234 levies Interest on the following defaults and delays in filing or payment of taxes
- Interest Under Section 234 A – Delay in filing the income tax return
- Interest Under Section 234 B – Default in payment of advance tax
- Interest Under Section 234 B – Deferment in payment of advance tax
Interest for delay in filing income tax return [Section 234A]
Income tax return for a financial year needs to be filed within the time prescribed under the income tax act, any delay in filing the return will result in the Levy of Interest under this section
If you have missed your due date of filing of return, then you will be any one of the following 3 situations
- You have not paid full tax or paid only partial tax to the Income Tax department
- You have paid excess tax and have to get a refund from the Income Tax department
- You paid your taxes perfectly
If you fall into situation 2 or 3 you no need to worry as there is no tax due to the Income tax department no interest will be applicable in the two situations
If taxes are outstanding and return has not been filed within the due date, Interest will be charged at 1% simple interest per month on the tax amount outstanding. The interest will be calculated from the due date of filing the return till the date on which the return is filed.
Let’s say you have an outstanding tax liability of Rs. 100,000 and your due date of filing the return is 31st July 2017 and you filed your return on 15th Nov 2017. You are 4 months late in filing your return (15 days also will be treated as month )
Interest is payable Rs.100,000 × 1 % × 4 months = Rs 4,000 ( Interest has to be paid in addition to outstanding tax liability)
Let’s say in the above example you have paid and advance tax of Rs. 25,000 and TDS of Rs. 50,000 has been deducted then interest will be calculated on the following amount
Tax Liability Rs. 100,000 – Rs. 25,000 (Advance tax paid) – Rs. 50,000 (Tds deducted)
= Outstanding Tax is Rs. 25,000
Interest is payable Rs.25,000 × 1 % × 4 months = Rs 1,000
Frequently asked questions (FAQ)
Q1: Does Interest under section 234A applies to all persons?
Ans: Interest under section 234A applies to all persons who are required to file a return of income under any of the provisions of Income Tax Act 1961.
Q 2: Does month includes part of the month?
Ans: Yes, under section 119A of Income tax act where any interest is calculated for any month or part of the month the fraction of the month would be treated as a full month.
Q 3: Any round-off provisions applicable for section 234A Interest calculation?
Ans: Yes, as per section 119A the amount on which interest to be calculated shall be rounded off to the nearest multiple of one hundred rupees, any fraction of one hundred rupees shall be ignored.
Example: If the tax outstanding is Rs. 11.594 then the amount should be rounded off to Rs. 11,500 (Rs. 94 fraction is ignored)
Q 4: What is Period of levy of interest under section 234A ?
Ans: Interest under section 234A is levied from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in the case where no return has been furnished, on the date of completion of the assessment under section 144.
Q 5: Which taxes to be Deducted from Assessed Tax for 234A Interest calculation?
Ans: From the assessed tax following taxes paid has to be removed before calculating Interest Under Section 234A
- advance tax,
- tax deducted/collected at source,
- relief claimed under various sections like sections 90/90A/91 and
- tax credit claimed under section 115JAA/115JD