Section 234A- “Interest for defaults in the filing of the tax return” is applicable where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date or is not furnished, the assesses shall be liable to pay simple interest at the rate of 1percent for every month or part of a month.

Illustration:Mr. Kapoor is a doctor. His tax liability for the financial year 2019-20 amounted to Rs. 8,400. The due date of filing the return of income in his case is 31st July 2021. On 5th August 2020, he paid a tax of Rs. 8,400 and filed his return of income. Will he be liable to pay interest under section 234A?

Interest under section 234A is levied for delay in filing the return of income. The due date for filing the return of income in the case of Mr. Kapoor is 31st July 2021 and he has paid the tax and filed the return on 5th August 2021. Hence, he will be liable to pay interest under section 234A for one month on the outstanding tax liability i.e.,

=Net outstanding tax * No. of months for delay in filing of ITR * Rate (1%)

= 8400*1*1% = Rs. 84

Vide Circulars 9/2021 and 17/ 2021, issued by CBDT, reliefs to taxpayers for certain compliance were provided in the form of extension of timelines including the extension of due dates for filing of Income Tax Return.

However, there was no relief concerning the implication of interest under section 234A of the Act wherever outstanding tax exceeds INR 1Lakh. In simple words, all such cases where the amount of tax on the total income as reduced by the amount of TDS, TCS and advance tax as specified in clause (i) to (vi) of sub-section (1) section 234A exceeds INR 1 Lakh, the above extension date is not applicable while calculating the interest under section 234A. Respective dates as specified under the Act (i.e., 31st July, 30th October and 30th November, as may be applicable) will be considered for furnishing the return for all such cases. Tax paid after such due date as specified under the Act will attract interest liability under section 234A.

Illustration: Mr. Kapoor is a doctor. His tax liability for the financial year 2020-21 amounted to Rs. 101,900. The due date of filing the return of income has been extended from 31st July 2021 to 31st September 2021. On 5th September 2021, he paid a tax of Rs. 101,900 and filed his return of income. Will he be liable to pay interest under section 234A?

Interest under section 234A is levied for delay in filing the return of income. The due date for filing the return of income in the case of Mr. Kapoor will be considered as 31st July 2021 and he has paid the tax and filed the return on 5th September 2021. Hence, he will be liable to pay interest under section 234A on the outstanding tax liability i.e.,

=Net outstanding tax * No. of months for delay in filing of ITR * Rate (1%)

= 101,900*2*1% = Rs. 2038.

This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Ruchika Gupta

AKGVG & Associates