ITR Filing FY 2023-24 (AY 2024-25) live

File your ITR Hassle-Free and Maximise your Refunds

File Today
  • TrustedTrusted by 1 Million+ Users
  • User Rating4.8 Star User Rating
  • SecureAuthorized by Tax Department
ITR Filing
linkedin
whatsapp

Section 234A: Interest Penalty on Delayed ITR Filing

Updated on: 23 May, 2024 06:12 PM

The Income Tax Act specifies certain provisions for the penalties for delay in ITR filing. If an individual fails to pay his/her tax on time or does not comply with the rules and regulations of the Income Tax Act, he/she has to pay penalties in the form of interest and fees. In this article, we will discuss about section 234A of the Income Tax Act and the penalties leviable under this section.

What is Section 234A of Income Tax Act?

Section 234A of the Income Tax Act in India deals with the interest payable by taxpayers for the delay in filing income tax returns. This section primarily pertains to the payment of interest on the amount of tax that remains unpaid or is not paid within the specified due date for filing income tax returns.

Here are the key points regarding Section 234A:

  • Delayed Filing: If an individual or entity fails to file their income tax return by the due date specified by the Income Tax Act, they might be liable to pay interest under Section 234A.
  • Interest Calculation: The interest is calculated at a simple interest rate of 1% per month or part of a month for the period of delay. The interest is calculated on the amount of tax that remains unpaid.
  • Applicability: Section 234A is applicable to cases where there's a delay in filing income tax returns and there's a tax payable by the taxpayer.
  • Exceptions: If there's no tax liability or if the taxpayer has paid all the taxes before the due date, Section 234A might not be applicable. However, it's crucial to file the returns on time, even if there's no tax liability to avoid potential penalties and complications.
  • Penalties: Apart from interest under Section 234A, there could also be penalties for delayed filing or non-filing of income tax returns. These penalties could vary based on the specific circumstances.

What Comes Under Section 234?

The cases for which taxpayers can be penalized under this section are known as default in furnishing income. These are:

  • If he or she does not pay tax on time.
  • If the individual does not provide for FORM 16 to the current employer after the change of the company.
  • If the taxpayer fails to comply with the taxation rules.

For all these failures, individuals have to pay interests that are charged in three heads, i.e

Section 234A Delay in Filing of Income Tax Return
Section 234B Delay in making payment of Advance Tax
Section 234C Deferred Payment of Advance Tax


Concept of Section 234A

The delay in filing tax return comes under Section 234A. If any taxpayer will file his or her tax return late, he or she will be charged a penalty in the form of interest. The taxpayer should file the return of his or her income before 31st july of the financial year.


Interest Payable in Section 234A

In the case of delay in filing an Income tax return (ITR), the taxpayer has to pay interest @ 1% per month. This amount is calculated on the tax sum that is outstanding. The individual has to pay interest from the first date (after the due date) till the date on which the income tax return is filed. For this also, there are two cases:

  • a. If the taxpayer has not claimed his or her tax refund.


    In this case, the taxpayer has to pay the interest on the total outstanding tax amount.
    For Example:

    Mr. Viraj has to file his income tax return by 31st July 2018 but delayed and filed his ITR in February for the financial year 2017-18. His outstanding tax amount is Rs. 2.5 lakh. Mr Viraj delayed his ITR for 7 months( August, September, October, November, Dcember, January, February) ( part of a month is rounded off) and if assumed he had not claimed his tax refund, he will be liable to pay interest as a penalty.
    Interest to be paid will be = 250000*1%*7 =17500

    Under section 234A Mr. Viraj is liable to pay Rs 17500 as a penalty in the form of interest levied @1% for the months delayed.

  • b. If the taxpayer has claimed his or her tax refund.


    In case if the taxpayer claimed a tax refund even if he or she has failed to file his income tax return on time, the interest will be charged on the net amount outstanding for him or her. This will be calculated as total outstanding tax amount minus the tax refund.

    For example: Mr. Tarun is eligible and claims a tax refund of Rs. 40000 while filing his ITR in February 2019. The outstanding amount of tax to be paid is Rs. 150000. The penal interest will be charged on the net value obtained after adjusting the tax refund from the outstanding amount. The net outstanding tax amount = 150000-40000= 110000. Hence, the interest to be paid by him will be = 110000*1%*7= 7700

  • Income Tax Return (ITR)
    This is a form in which the taxpayer has to file all the information related to taxation. This includes all the incomes of the assessee, taxes to be paid and so on.
  • Outstanding tax amount
    This is the total sum that is outstanding on the taxpayer and is to be paid by the assessee.
  • Penal interest
    This interest is the amount that is penalized on the taxpayer for the delay in the filing of an Income Tax Return.
  • Due date
    This is the date of the financial year till when the Income Tax Return has to be filed by the individual. This is specified under the section 139(1) of the Act.

Conclusion

If you fail to file your ITR on time, it might lead to penalties under section 234A. So, if there is a delay in filing your return, get ready to pay extra in the form of penal interest. An interest @1% is levied on delay in ITR filing. The return should be filed before 31st July of the financial year you have to pay the income tax.

ITR filing for FY 2023-24 has started. If you want to maximize your refunds and avoid penalties and interest, it is best to consult a tax professional who will not only help you file your ITR but also optimize your taxes, so that you can keep more of what you earn. Hire an online CA now!


Frequently Asked Questions

Q- Is Delay in filing ITR is charged?

Yes, if you delay in filing ITR from the due date that is fixed by the Income Tax Act, you will be charged a penalty in the form of interest to be paid on the outstanding taxable amount.


Q- Do section 234A applies in case of refund?

Yes, an interest of 1% per month is to be paid by the defaulter of filing return of income tax on time.


Q- How is the penal interest calculated on the taxable amount?

The interest that is to be charged will be computed from the due date for the filing of an income tax return in the financial year till the date you actually filed your income tax return. The interest that is charged on you will be 1% per month for the months you have delayed your filing.


Q- I am 4 months 10 days late in filing my ITR, how to calculate interest penalty under Section 234A?

If taxpayer missed the last date for filing ITR then Interest shall be payable @ 1% per month or part of the month.


Q- How is 234C interest calculated?

Advance tax is paid on the following dates of a financial year:


Q- What happens in case of a claim of a tax refund?

The taxpayer needs to file an Income Tax Return claim Income tax Refund.


CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.