As we know, an income tax return is to be furnished within the prescribed time limit. In case of failure, the taxpayer will be liable to pay interest for delay in filing of an income tax return. Accordingly, such interest is payable as provisions of section 234A of the Income Tax Act, 1961.

Recently, while extending the due dates for filing of the income tax return for the Previous Year 2020-2021 (i.e., Assessment Year 2021-2022) interest provisions of section 234A are defined to be treated differently.

The present article briefly covers the provisions of section 234A along with the treatment as clarified vide circular no. 9 of 2021 dated 20th May 2021.

Circumstances under which interest will be payable under section 234A of the Income Tax Act-

Interest is payable under section 234A under any of the following circumstances-

  • The taxpayer fails to furnish or furnishes the income tax return after expiry of the due date; or
  • The taxpayer, in response to the notice issued under section 142(1), fails to furnish or furnishes the income tax return after the expiry of the due date.

Thus, in nut-shell, interest for delay in filing of income tax return is payable as per provisions of section 234A.

Rate of interest payable under section 234A-

As per section 234A(1), the defaulter will be liable to pay simple interest @1% per month or part thereof.

Amount on which interest is payable under section 234A

The amount on which interest is payable is defined hereunder-

Particulars Amount on which interest is payable
In case of regular assessment Interest will be payable on the amount as formulated hereunder –

Amount of tax on the total income  XXX

(-) Advance tax (XXX)

(-) TDS/TCS  (XXX)

(-) Relief available under section 89/ 90/ 90A/ 91 (XXX)

(-) Tax credit claimed under section 115JAA/ 115JD  (XXX)

Amount on which interest will be payable  XXX

In case of preliminary assessment under section 143(1) Interest will be payable on the amount of tax on the total income as determined under section 143(1).

Period for which interest is payable under section 234A

Interest under section 234A will be payable for the following period-

Particulars Period for which interest is payable
When the return is furnished From the date immediately following the due date till the date of filing of an income tax return.
When the return is not furnished From the date immediately following the due date till the date of completion of the assessment under section 144.

Interest payable under section 234A vis-à-vis Assessment Year 2021-2022-

Vide circular no. 9 of 2021 dated 20th May 2021, the due date for furnishing of the income tax return is extended from 31st July 2021 to 30th September 2021 for non-audit taxpayers. However, the due date is extended from 31st October 2021 to 30th November 2021 in the case for taxpayers who require to get their books of accounts audited.

Interestingly, the said circular has come up with clarification 1 which defines the applicability of provisions of section 234A vis-à-vis extension of due date as detailed above. Clarification 1 is simplified hereunder-

Particulars Treatment to be given under section 234A
Cases, wherein, specified amount of tax exceeds INR 1 Lakhs Due date extension as per circular no. 9 of 2021 will not be applicable to interest provisions. Accordingly, in case of delay in filing of the return, interest will be payable from 1st August 2021 (non-audit cases) or 1st November 2021 (audit cases).
Cases, wherein, specified amount of tax doesn’t exceed INR 1 Lakhs Due date extension as per circular no. 9 of 2021 will also be applicable to the interest provisions. Accordingly, in case of delay in filing of the return, interest will be payable from 1st October 2021 (non-audit cases) or 1st December 2021 (audit cases).

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4 Comments

  1. GANDHI MOHAN BHARATI says:

    will the government also stick to their paying of interest on the same principle when refund is due? I will not be surprised with the functioning of the new Portal, may be that interest may get deducted from refund due

  2. MAHESH says:

    FOR A SR.CITIZEN, IF TOTAL TAX DUE IS 120000,
    SELF ASSESSMENT TAX OF RS. 50000 IS PAID ON 31ST JULY; INTEREST WILL BE CHARGED ON 120000 OR ON 70000; PL. GUIDE. Tq.

  3. Ashok Kumar Raheja says:

    Dear CA KANOI,
    Your article about 234A is quite informative.
    However, can you please clarify:
    What will be the case when self-assessment tax, which is more than Rs 1 lac, is deposited before 31st july, but falls short by say, Rs 10,000 while filing IT Return, due to some missed out income. Will interest u/s 234A will be applicable, and if so, on what amount??
    Obliged for your clarification.

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