The Most Comprehensive Guide
on the New Income Tax Section 234F

What is the meaning of Section 234F?

In Budget 2017 our honorable Finance Minister, Mr. Arun Jaitley introduced a new section 234F to ensure timely filing of returns of income. As per section 234F of Income Tax Act, if a person is required to file Income Tax Return (ITR forms) as per the provisions of Income Tax Law [section 139(1)] but does not file it within the prescribed time limit then late fees have to be deposited by him while filing his ITR form. The quantum of fees shall depend upon the time of filing the return and total income.

When is a person mandatorily required to file Income Tax Return?

If you fall in the below conditions then you have to mandatorily file your income tax return:

• If the gross total income (before allowing any deductions under section 80C to 80U) exceeds the basic exemption limit i.e. Rs.2,50,000 (for individuals below 60 years) or Rs. 3,00,000 (for individuals of 60 years and above but less than 80 years old) or Rs. 5,00,000 (for individuals of 80 years and above) as the case may be.
• If you hold any asset including financial interest in any entity located outside India OR has signing authority in any account located outside India as a beneficial owner or otherwise.
• If you are a beneficiary of any asset located outside India.

Basic exemption limit is the maximum threshold amount up to which your income is not chargeable to tax. In simple words, if your income exceeds the basic exemption limit then you are mandatorily required to file the return. Currently, it is Rs.2,50,000 (for individuals below 60 years) or Rs. 3,00,000 (for individuals of 60 years and above but less than 80 years) or Rs. 5,00,000 (for individuals of 80 years and above) as the case may be

What is the difference between Gross Total Income and Total Income?

Gross Total Income is the total of all five heads of income namely Income from Salary, Income from House Property, Income from Business, Income from Capital Gain and Income from Other Sources.
Whereas Total Income is the income which is computed after subtracting all deductions from the Gross Total Income. In other words, it is the amount of income which is offered for tax and that’s why it is also known as taxable income.

What are the prescribed time limit(Due Dates) for filing ITR?

The due dates for filing Income Tax Return under section 139(1) of Income Tax Act for different categories of taxpayers are as under :

Who will be covered under the scope of 234F?

All persons including Individual, HUF, Company, Firm, AOP etc. will be covered under the scope of Section 234F of Income Tax Act 1961 and will be liable to pay late filing fees, if the Income Tax Return is filed after their respective due dates.

What is the amount of fees that can be levied under 234F by the Income Tax?

The quantum of fees that can be levied under section 234F of income tax act 1961 is as under :
(i) If the return is furnished after 31st August but on or before the 31st day of December of the assessment year - Rs. 5000 (i.e 31st August, 2019 and 31st Dec, 2019 for FY 2018-19)
(ii) If the return is furnished after 31st December of the assessment year - Rs. 10,000
However, if the Total income i.e. Income after deduction is less than or equal to five lakh rupees, then, in that case, the fee amount shall not exceed Rs. 1000.

Let’s understand the quantum of fee that would be payable under section 234 F on the following income and return filing date through an example :

From which date the provisions of penalty under section 234F shall be effective?

The provisions of penalty under section 234F shall be applicable from 1 April 2018 i.e. in respect of Income Tax returns to be filed for FY 2017-18 (or AY 2018-19). In simple words, if we file the income tax return of F.Y 17-18 after 31st August 2018 then fees u/s 234F shall become operative. Financial year 17-18 was the first year when any such fees would be leviable without the intervention of Assessing Officer. Similarly if return for F.Y. 2018-19 is filed after 31st August 2019, then penalty under 234F will be levied.

What was the reason for the introduction of penalty as per Section 234F?

In view of improving tax compliance, it is important that the income tax returns are filed within the due dates specified in section 139(1). Therefore, section 234F has been inserted in the Income Tax Act. Further, the reduced time limits proposed for the making of an assessment under various sections are also based on pre-requisite that returns are filed on time.

How to pay 234F Fees?

As per Finance Act 2017, Late fees under section 234F can be paid by the way of Self Assessment Tax u/s 140A. Therefore, through Challan 280, under the head of Self Assessment Tax, this penalty can be paid from FY 17-18 and onwards.

Under which section shall the fees under section 234F will be paid if you have missed the deadline for filing ITR?

The fees u/s 234F shall be payable under section 140A (Self Assessment Tax). A consequential amendment has been made in section 140A (Self Assessment Tax) to include that in case of delay in furnishing of return of income, along with the tax and interest payable, the fee for delay in furnishing of return of income shall also be payable.

What was the penalty before section 234F was introduced?

Before the introduction of sec 234F, the penalty for failure to furnish the return of income was leviable under section 271F.

As per this section, if the income tax return was not filed before the end of relevant assessment year then Assessing Officer, at its discretion may levy a penalty amounting to Rs. 5,000/- However, this section has been withdrawn from the assessment year 2018-19 and onwards after coming of penalty under section 234F into force.

How to avoid paying the fees under section 234F to the Income Tax Department?

In order to avoid payment of late fee u/s 234F, one needs to file the income tax return on time in respect of every assessment year :-) Visit tax2win for hassle free filing.

Can the late fees u/s 234F be waived of in the genuine cases?

No, fees u/s 234F is mandatorily applicable, therefore, it cannot be waived off by income tax authority.

Can excess TDS deducted be adjusted from the fees u/s 234F?

Yes, the income tax department will adjust the excess TDS deducted which you would have received by the way of refund in the payment of Fees under section 234F.

Will the impact of amendment under section 234F come on the intimation under section 143(1)?

A consequential amendment in section 143(1) has been done in consonance with the introduction of sec 234F. Now, the fee payable under section 234F would also be considered in the computation of amount payable or refund due, as the case may be, on account of processing of the return.

Is 234F a fee or a penalty?

According to the Income Tax Act, the amount payable under sec 234F is termed as late fees. But it has been observed that in common parlance, many of us are designating the amount under sec 234F as the penalty instead of fees, which is not the case. The reason being that, this fee is steeper in nature in which the assessing officer has no role in deciding its applicability. It automatically applies immediately after the due date.