Section 234A : Interest Penalty for Late Filing of ITR

What is Section 234A?

The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest as per Section 234. Interest Penalty shall be levied under section 234A in case of late filing of ITR. Apart from that, there are two more types of interests under section 234 which fall under the Advance Tax category. Hence it is also important to remember the advance tax due dates:

Advance Tax Filing
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So let’s discussing Section 234A in this article. 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. Hence, if you fail to file your return within that prescribed time, you will be liable to pay interest penalties u/s 234A. Moreover, if you do not file your return in the prescribed time, you will be in one of the following three positions:

  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 position, you need not worry about attracting interest for not filing your ITR on time. However, Assessing Officer may still choose to charge some interest if he/she thinks it is necessary.

Therefore, in case of delay in filing the return, a taxpayer will be liable to pay interest at 1% of tax liability per month or part of the month.

Time period for levy of interest u/s 234A

Penal 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 extended due date to file ITR for AY 2021-22 is 31st December 2021 for non tax audit cases. If a taxpayer misses the due date, then penal interest u/s 234A will be levied. The interest u/s 234A will be imposed from 1st of August 2021 (since original due date is 31st of July) 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. In other words, the taxpayer is liable to pay simple interest at 1% per month or part of a month for delay in filing ITR.

Example for Penalty for late filing of ITR Under Section 234A

Arpan is an engineer. The due date for filing ITR is 31st August 2019. However, he filed it on 8th December 2019. His tax liability as per tax rates comes to INR 10,550.

In this case, as Arpan 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 105.5 x 4 (interest to be calculated for four months) = INR 422

So now Arpan will have to pay 10,550 (tax) + 422 (interest) = INR 10,972

FAQs

What is the difference between 234A and 234B?

Interest u/s 234A is levied on taxpayers if they delay in filing their Income Tax Return (ITR). While Interest u/s 234B of Income Tax Act is levied upon those taxpayers who default in payment of Advance Tax.

What happens if I delay filing my ITR?

First of all, If your income falls under the taxable bracket you have to file your ITR without fail. Secondly, If you missed the deadline to file the ITR you can still file it but you may attract penalties. Moreover, If you don’t pay your taxes on time then if you are claiming any refunds they will get delayed. You will get lesser time to revise your ITR. and Lastly, You will have to pay interest on the taxable amount if you delay filing your ITR.

What are the documents needed to file ITR?

Following are the documents required to file ITR:
– Aadhaar
– PAN
– Bank account details
– TDS Certificate (Form 16, 16A, 26AS)
– Tax payment challan (Self-assessed or Advance tax)
– Original notice (In case of refiling the ITR)

Who is eligible to file ITR?

All PAN holders should ideally file their ITR. However, If your income is more than rupees 2.5 lakh p.a then you are mandatorily eligible to file your ITR.

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

    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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