Section 234A Interest for AY 2020-21: Taxpayer’s hopes are normal as usual but results are opposite as expected

In view of the challenges faced by taxpayers in meeting the statutory and regulatory compliance requirements due to the outbreak of Novel Corona Virus (COVID-19), the Government has issued Notification dated 24th June 2020 under the Ordinance for extension in the time limits for making various compliances falling due between 20th March 2020 to 31st December 2020. The said notification has, inter alia; extended the deadline for filing return of income for F.Y. 2019-20 (A.Y. 2020-21) from original due date of 31st July 2020 (for non-corporate taxpayers not liable to tax audit) and 31st October 2020 (taxpayers liable to audit) to 30th November 2020.

Ordinarily, whenever due date for filing return is extended, the interest payable under section 234A for failure to file return on time also gets consequentially deferred to the extended due date. However, the 2nd proviso to the said notification prohibits the normal operation of consequential impact of extension of return filing due date.

It states as follows: –

“Provided further that the extension of the date as referred to in sub-clause (b) of clause (i) of the first proviso shall not apply to Explanation 1 to section 234A of the Income-tax Act, 1961 in cases where the amount of tax on the total income as reduced by the clauses (i) to (vi) of sub-section (1) of the said section exceeds one lakh rupees”.

The press release issued thereafter clarified above that there will be no extension of date for the payment of self-assessment tax for the taxpayers having self-assessment tax liability exceeding Rs. 1 lakh. In this case, the whole of the self-assessment tax shall be payable by the due dates specified in the Income-tax Act, 1961 (IT Act) and delayed payment would attract interest under section 234A of the IT Act”.

In this state of affairs, the honest taxpayers as usual hope and recommend CBDT to review the above provisions of law & refrain from levying interest u/s 234A in AY 2020-21 and to come up with suitable amendment. The said recommendations are based on below rationale:

a) The issuance of notification for extension in timelines/compliances itself is extraordinary due to the outbreak of Novel Corona Virus (COVID-19) and its declaration as pandemic by WHO.

b) The absence of details incapacitates the honest taxpayers in determining the SA Tax as it requires the taxpayer to collate relevant information from various sources. The most common source is interest from banks and resultant TDS. Further, as the time line to file TDS return is extended upto 31st July 2020 and issuance of TDS certificate thereto by 15th August 2020, most banks/tax deductors have not yet filed their TDS returns and taxpayers is in limbo to ascertain SA Tax.

c) Taxpayers greater than 60 years i.e. resident senior citizens not having business or professional incomes are exempted from payment of advance tax. They are required to pay full amount of their liability by way of SA Tax after gathering relevant information and making tax computation. Its serious burden on them to pay SA Tax on or before 31.07.2020 to avoid 234A interest.

d) The extension of return filing dates duly recognised the fact that the taxpayers are encountering difficulties in ensuring tax compliances in normal manner on account of severe restrictions on movement and social distancing norms. Further, several states like (TN,WB, MH) have extended lockdown till 31st July, 2020 because of outburst of COVID 19 pandemic.

e) Also there seems no rationale for dividing tax payers having SA tax liability below or exceeding one lakh. There may arise a situation where middle class/small businessman/senior citizens are having their total tax liability marginally above Rs. 1 lakhs and are normally paying full tax liability through SA tax in the absence of any TDS/Advance Tax vis a vis HNIs, Large corporates, etc.. having total tax liability in crores and resulting SA liability not exceeding Rs. 1 Lakhs due to TDS/Advance Tax/Tax credits.

f) Lastly, the Government is also adequately compensated for delayed payment of taxes through interest u/s. 234B for which there is no relaxation. Further, in past the revenue has conveniently reduce interest rate for refund u/s 244A from its peak of 18% p.a. prevailing in 1990s to 6% p.a. gradually in year 2003 in consonance with the state of economy. The current pandemic and impending global recession too calls for removal/reduction of burden from high rate of 1% u/s 234A.

In view of the above reasoning, the taxpayers hope for suitable amendment to the notification as this poses heavy burden on them. Due to current pandemic, the author expects CBDT to meet the expectations of honest taxpayers and come up with suitable amendment.

Author Bio

Qualification: CA in Practice
Company: Sachin N Gupta & Associates
Location: Mumbai, Maharashtra, IN
Member Since: 02 May 2020 | Total Posts: 3

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25 Comments

  1. Giriraj says:

    it is dichotomy on the part of Governments to publicise populist measures in louder way so the extension of filing of ITR Dates were widely publicised each time when an extension is made but no where rules for tax deposits was made public in same manner, except Government notification….when people were made afraid of touching news paper, how a lay man get information, such nuances of tax payments are also not got much publicity in local newspapers except in Financial news papers…CBDT should revisit the levy of interest u/s 234A during AY 2020-21 and should waive the same on genuine grounds to keep the spirit of the law. The tax professional should raise issue with due justifications on humanitarian grounds for senior citizens

  2. Giriraj says:

    it is dichotomy on the part of Governments to publicise populist measures in louder way so the extension of filing of ITR Dates were widely publicised each time when an extension is made but no where rules for tax deposits was made public in same manner, except Government notification….when people were made afraid of touching news paper, how a lay man get information, such nuances of tax payments are also not got much publicity in local newspapers except in Financial news papers…CBDT should revisit the levy of interest u/s 234A during AY 2020-21 and should waive the same on genuine grounds to keep the spirit of the law. The tax professional should raise issue with due justifications

  3. anita goel says:

    As last date for filing of income tax return is approaching has Govt CBDT waived 1% interest
    under 234 A for at least senior citizens paying more than 1lac tax for fy19-20

  4. Satish Raval says:

    This is atrocious on the part of CBDT and shows poor frame of mind of CBDT to impose unjust burden to earn pittance of revenue from your parent and it’s discriminatory to be unconstitutional. Awake from being muddled .

  5. Satish Raval says:

    This is atrocious on the part of CBDT and shows poor frame of mind of CBDT to impose unjust burden on senior citizens and it’s discriminatory to be unconstitutional. Awake from being muddled to earn pittance of revenue from your parents.

  6. Tirtharenu Sanyal says:

    The 1% interest is unacceptable. Senior citizens are not being able to go out due to the Pandemic and the Govt is imposing those restrictions. The imposition of the 1% additional interest on deferred amount means the exemption was a sham. I feel bad at the attitude Govt takes on honest tax payers while crores of rupees are not being payed by the big business houses.

  7. ASHOK GUPTA says:

    Even I was shocked to get an Interest liability of more than 20000 from my CA. Now i am caught in a bind. Whether to delay filing my return and piling on the interest or pay it now.

  8. Manoj Kumar Pandey says:

    I came to know of this hidden proviso today when filing the return.
    I am a senior citizen and tax liability after calculations today is more than Rs1 lakh.
    So, I am made to pay interest/ penalty under 234 A, B and C.
    This is atrocious. If the govt wanted to levy this, they should have been made clear. If they are considerate, they should refund the interest and penalty charged so.
    Kindly take it to tax authorities on behalf of similar tax payers.

  9. V.G.Hingorani says:

    I am a senior citizen and I have been filing my tax returns every year before the due date. I have received appreciation emails from IT department . Today I was shocked when I received the tax computation from my CA with interest for non payment of SA amount before 31July’20. Sir you are well aware about the difficulties faced by all citizens and more so by senior citizens due to pandemic. First the government and our honorable prime minister asks all citizens and more so the senior citizens to avoid going out of the house to avoid contacting the corona virus and then expects us to pay SA tax before 31July failing which the CBDT slaps a penalty of 1% of the tax due. This is a nice way of showing your appreciation for seniors to obey government instructions and stay at home and then make honest citizens pay penalty under Section 234A.
    How does CBDT expect senior citizens to pay SA tax before 31July when the banks could give interest certificates only in August and form 16A in Sept. Form 26AS was updated in September. As senior citizens are exempted from payment of advance tax it was assumed that section 234A too would be extended till 31st December. When the Tax Return filing date was extended till 31 December there was no intimation to public either on TV or in newspapers about payment of SA tax by 31July 2020.
    I would earnestly request the honorable Prime Minister and Finance Minister to waive the interest under section 234A for senior citizens and to make an announcement at the earliest on all TV channels and newspapers. We have gone through enough so please do not make our lives more difficult by making us pay interest on SA amount. Thanks

  10. Purushotham.s.R says:

    I am a senior citizen and invested my savings and retirement benefits under various instruments to get the returns to lead a decent life. I go to my tax auditor once a year to assess my tax liability and pay the self assessment tax and file the returns before 31st July of every year and I get appreciation mail also from IT every year for my contribution to nation building. Due to extension of filing returns upto 31st Dec and also as I did not get TDS statement from my employer within 31st July I went to my auditor yesterday to assess my tax and file the returns and to my astonishment an interest amount under section 234a is levied on the tax due from me. While the government extended the time limit upto 31st Dec 2020 due pandemic situation and levying penalty for a honest taxpayer and that too a senior citizen is how far correct.The finance ministry should look into this aspect and make suitable amendment to defer levying of interest under section 234a for honest and small tax paying senior citizen like me.

  11. P K Chawla says:

    As a senior citizen, I sincerely request CBDT to review this issue and provide relief as soon as possible as at present Senior Citizens are badliy hit by the Corona and they are not able to go out of home even for treatment.

  12. T. R. Subramanian says:

    It is atrocious for the govt to impose penalty under Sec234A when the last date for filing income tax returns has been extended. This is absurd. The details like form 16,16A has not been provided by the govt departments by 31-7-2019 to the tax payers and they are punished with fine for the inefficiency of the govt

  13. CA Zia Rizvi says:

    Whether there is any likelihood of any notification for withdrawal of interest under 234A for delay in filing of return even if all due tax has been paid in Aug 2020.

  14. Bishwanath Bhattacharya says:

    Interest u/s 234A is most unjustified, more specially for the Senior citizens. Due to Pandemic. Lockdown, and other factors Bnaks could not give Form-16 before August’20. Even after chasing for so many days in SBI/Baranagar Branch, I have been given only Form-16A only on 24.09.20. Form-16 will be given still later. Under this circumstance, how can CBDT impose an interest for not paying SA tax in time ? It should be withdrawn forthwith giving a clear notification in the media.

  15. Srinivas says:

    Extension of the tax filing date and applicability of 234A are interrelated and the Finance Ministry could have easily anticipated this impact. This is a burden for senior citizens who are not required to pay Advance tax and had to wait till Aug 15 to get their Form 26 AS. Request early clarification and refund of interest levied since the tax preparation utility is levying the interest

  16. GUNA SEKARAN B says:

    As Lockdown was enforced from 23 03.2020 onwards, I could not remit my IT for the FY 2019-20 (AY 2020-21). After ascerting that Self Assessment IT can be paid online, I have paid my IT along with Interst amount. I hope the Govt will look into for waival of Interest amount on IT at this pandemic situation for Pensioner like me.

  17. R NARAYANAN says:

    The above said concern in respect of 234A interest shall be leniently modified due to the prevailing situation. The Finance Minister or the CBDT shall not remain a mute spectators towards the honest tax payers of this nation . No need that some one or some forum should fight vigorously, the lawmakers and the governing body themselves shall consider these genuine issues.
    Thanks

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