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Interest for non filing/delayed filing of Income Tax Return:


Section 234A of the Income Tax Act imposes a penal interest in case of non filing/delayed filing of Income Tax Return. If we file income tax return after the due date, interest under section 234A will be levied.
  • Interest @1% per month or part of a month is to be charged on the outstanding amount of income tax payable.
  • Interest will be calculated for the period of delay in filing IT return. The period for which interest is charged is calculated from the first day after the due date of filing of return till the return is filed. 
  • Where no return is filed, the period is to be calculated from the day immediately after the due date of return filing till the completion of assessment.
  • The interest u/s 234A is levied on the amount of income tax on total income, reduced by the advance tax paid, Tax Deducted at Source(TDS)/TCS and other relief claimed under section 90/90A/91 and tax credit claimed under section 115JAA/115JD.
  • To make it simple we can say that in general  interest will be calculated on the amount of tax remaining unpaid on 31st March of the financial year.

Other Important Points:

  • The amount of tax on which penal interest is to be calculated shall be rounded off to nearest multiple of Rs.100. For example if interest is to be calculated on Rs. 9894, interest will be calculated on Rs. 9900.
  • For calculation of interest any part of month shall be treated as whole month. For example if the delay in furnishing return is of 5 months and 10 days, interest will be calculated for 6 months.
How to avoid Interest u/s 234A?
  • File Income Tax return before due dates. No delay in filing return, no interest u/s 234A.
  • Interest u/s 234A is levied on the outstanding amount of tax. So if no outstanding tax no interest. We must make sure to deposit all due taxes on our other incomes like interest incomes well before 31st March of the financial year as advance tax.
"CBDT issued a circular on 10th February 2015, which brings in some relaxation. Now if all due taxes are paid before the due date of filing return, interest u/s 234A will not be charged'.

Hence now if all due taxes are paid even before the due date of filing return there will be no interest u/s 234A
  • Salaried people may avoid this interest by declaring their other incomes to their employers. Employer will deduct due tax on such incomes as TDS. As all taxes would already have been deducted there will be no tax outstanding.
Some examples to understand interest u/s 234A:

Lets take an example for the FY 2013-14(AY 2014-15), suppose total tax is Rs. 275900. TDS is Rs. 270000. Here outstanding tax will be (275900-275000) Rs. 5900.
  • In this situation if return is filed on due date ie. 31st July 2014, there will be no interest levied u/s 234A as return is filed on time.
  • If however return is filed suppose on 8th August 2014 ie. after due date, interest @ 1% will be levied u/s 234A for delay in filing return on Rs. 5900 for one month.
  • In the same situation suppose outstanding tax of Rs. 5900 was paid on 2nd April 2014 & return was filed belated suppose on 15th September 2014. Though all the taxes are paid but as paid after 31st March 2014 and return is filed after due date there will be interest levied @1% u/s 234A on Rs. 5900 for two months.
  • In the same stuation suppose TDS is Rs. 275900, means there was no outstanding tax and return was filed late on 26th December 2014. Though return is filed after due date but there will be no interest levied u/s 234A as there is no tax outstanding to levy the interest.
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Some Quick links:
Belated Return-A return filed after due date
Interest u/s 234B for default in payment of Advance Tax
Interest u/s 234C for default in payment of Advance Tax instalment
How to pay Self Assessment Tax










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