Section 234A : Interest for Late Filing of ITR

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Hiral Vakil

Income Tax Filing
ITR Penalty
Section 234A
Last updated on January 31st, 2023

The due date to file the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like paying interest as per section 234A of income tax act.

What is Section 234A?

As we know, ITR for a particular Financial Year needs to be filed within the prescribed time limit i.e, 31st July of the next financial year when a tax audit is not applicable. Hence, if you fail to file your return within that prescribed time, you will be liable to pay interest u/s 234A. In that case, you will be in one of the following three situations :

  1. You have outstanding taxes to pay to the IT department
  2. You are eligible for a tax refund from the IT department
  3. Your taxes have been paid on time with no refund expected or taxes payable.

If you fall under the 2nd or 3rd situation, you need not worry about attracting interest for not filing your ITR on time.

Apart from 234A, following interest/fee are also covered under section 234:

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When will interest u/s 234A be levied?

Interest u/s 234A is levied from the first day after the due date till the actual date of paying the taxes. For example, the due date to file ITR for AY 2022-23 is 31st July 2022 for non tax audit cases. If a taxpayer misses the due date, then interest u/s 234A will be levied. The interest u/s 234A will be imposed from 1st August 2022 till the date they have their taxes paid.

Rate of Interest applicable u/s 234A

Interest is applicable at 1% per month or part of a month. The nature of interest is simple interest.

While calculation of the interest u/s 234A, part of the month will be considered as full month. For example, If there is a delay of payment in interest of 3months and 10 days, as per the rule, 10 days will be considered as 1 month. Hence, interest will be levied on 4 months.
Tip
While calculation of the interest u/s 234A, part of the month will be considered as full month. For example, If there is a delay of payment in interest of 3months and 10 days, as per the rule, 10 days will be considered as 1 month. Hence, interest will be levied on 4 months.

Calculation of Interest u/s 234A

Let’s understand the calculation through an example.

Karan is an engineer. The due date for filing ITR is 31st July 2022. However, he filed it on 8th December 2022. His tax liability as per tax rates comes to INR 10,550.

In this case, as Karan filed his ITR after the due date, 1% of his total tax liability will be added for each month of delay, as interest under Section 234A.

So total interest amount = INR 10,550 x 1% per month x 5 months (August, September, October, November, December) = INR 528.

So now Karan will have to pay 10,550 (tax) + 528 (interest) = INR 11,078.

FAQs

What is the difference between 234A and 234B?

Section 234A of Income tax act is levied on taxpayers if they delay in filing their Income Tax Return (ITR). While section 234B of the Income Tax Act is levied upon those taxpayers who default in payment of Advance Tax.

What happens if I delay filing my ITR?

If your gross income is more than the basic exemption limit then you have to file your ITR. In case you miss the deadline and you have outstanding taxes, interest u/s 234A, 234B and 234C will be levied. Additionally, a fee u/s 234F will also be levied.

If the due date is extended, do I need to pay interest u/s 234A?

Yes, even if the due date is extended, interest u/s 234A will be levied.

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in four different instalments in case your Taxable Liability is more than INR 10,000 for the financial year which stands true for you.

    The due dates for advance tax installments are:

    • 15th June - 15% of the tax liability
    • 15th Sept - 45% of the tax liability
    • 15th Dec - 75% of the tax liability
    • 15th March - 100% of the tax liability

    If you are eligible to pay advanced tax but have not paid advance tax, the penalty will be applicable u/s 234B and 234C.

    Let us know if you have any further questions!

  2. Hi Team, I had assumed that I will be able to pay advanced tax before March because I thought I could go for presumptive tax filing. But now it looks like I cannot opt for a presumptive taxation scheme. So does it mean that I did not pay the advanced quarterly tax that I was supposed to pay?

    If yes, what is the penalty in every case or are there some exceptions to avoid this interest penalty?

    Thanks in advance!

  3. Hey @riya_gupta

    You will be charged an interest penalty under section 234C for the delay/non-payment of advance tax during the year @1% per month on the shortfall amount. Additionally, under Section 234B a penalty interest is imposed on the taxpayers in case the advance tax payment is less than 90% of assessed tax liability during the year.

    You can avoid interest u/s 234B by paying at least 90% of your assessed tax liability by March 15, 2021.

    Hope this helps!

  4. Hey @TeamQuicko

    I have LTCG of more than 7 lakhs from the equity for this year. Is there a way to reduce my tax liability? Also, do I have to pay the tax in advance? If I fail to do so, what will be the penalty/interest percentage I have to pay during my tax filing in 2020?

  5. Hey @ViraajAhuja47, you can set off against non-speculative business loss like F&O for the current year. Long-term capital losses for the previous as well as the current year. Yes, you are required to pay advance tax in case your tax liability is more than INR 10,000 for the FY. The penalties for non-payment of advance tax are:

    Non-payment of Advance Tax u/s 234B 3: Interest at 1% in case the taxpayer fails to pay 90% of the tax liability in the same FY
    Delay in Payment of Advance Tax u/s 234C 1: if there is a delay in tax payment than interest @ 1% is applicable.

  6. Hello @S_P

    Tax paid on or before 31/03/2021 will be considered as advance tax for FY 2020-21. So a trader can determine the profits between 15th March to 31st March and pay the tax on 31st March, there will be no interest levied.

    Hope this helps!

  7. Hi @TEst_Netflix,

    Tax audit is applicable when:

    1. Turnover is above the threshold limit
    2. Profit is >=6% of the turnover

    You can use this tool to determine if tax audit is applicable to you:

    It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.

  8. Do I have to pay Advance Tax if the TDS for the year is sufficient to cover tax liabliltiy?

    Does Dividend on equity shares attract separate Advance Tax or is it just another source of income?

  9. Hi @vivek25,

    You are liable to pay advance tax if your total outstanding tax liability for the financial year after TDS is above INR 10,000.

    To calculate your advance tax liability you need to add your estimated income for the financial year from all sources including - Salary, House Property, Capital Gains, Business & Profession and other sources.
    Next, subtract all eligible deductions, expenses, and Tax Credit available to you.
    Now, if your outstanding tax liability is above INR 10,000, you need to pay advance tax to avoid penalty u/s 234B and 234C.

    Hope this answers your query :slight_smile:

    You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime

  10. Hi
    When I pay the advance tax through the ZERODHA-QUICKO platform, does it get saved/stored? For example I have paid for Q1. so when I have to pay for Q2, will this be automatically calculated?
    Thanks

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