Mandatory & Penal Interest u/s 234A for Late Returns or No Return

In case of income tax return is filed after the specified due date or is not filed at all, simple interest is payable on the amount of tax assessed as reduced by the amount of advance tax paid, TDS/TCS. The interest rate is @1% for every month (or part of the month) of delay, i.e. from the due date to the date of filing the return or where no return has been filed.

Complete Detail about Interest u/s 234A

1. CHARGEABILITY:

The assessee is liable to pay interest in the following cases:-

Income Tax Return is filed after the due date specified u/s 139(1); or
Income Tax Return is not filed.

2. COMPUTATION:

(a) Rate:- 1% per month or part of the month simple interest.

(b) Period:- The interest will be payable for the period Commencing from the date next following the due date specified u/s 139(1) and ends on:

(i) In case where Income Tax Return is filed, the date of filing of Income Tax Return,

(ii) In case where Income Tax Return is not filed, the date of completion of assessment u/s 144/147/153A.

Note:- Part of the month shall be considered as full month.

(c) Amount on which interest is payable:- Tax determined u/s 143(1) or an assessment u/s 143(3)/144/147/153A (Whichever section apply) as reduced by the following:-

  • Tax deducted and collected at source
  • Advance tax paid by the assessee
  • The amount of relief of tax allowed u/s 89/90/90A and u/s 91
  • Tax credit allowed to be set off u/s 115JAA and 115JD

Note: Self Assessment tax paid u/s 140A shall be deducted if it is paid on or before the due date. (In view of Supreme Court decision in case of Dr. Prannoy Roy)

3. COMPUTATION OF INTEREST FOR PAYMENT UNDER SECTION 140A (relating to self assessment tax)

(a) Substitute the words “Tax determined u/s 143(1) or on assessment u/s 143(3)/144/147/153A” by the words “tax on income declared in ROI”.

4. Interest payable under this section shall be reduced by the interest. If any, paid u/s 140A or otherwise.

5. In case where an assessee has failed to furnish ROI, then interest u/s 234A shall be applicable.

6. For computing interest, “Tax” means “Income Tax including surcharge & Education Cess”.

7. Where as a result of an order made u/s 154/ 250/ 254/ 260A/262/263/264 or order of settlement commission u/s 245D, the amount of Income Tax on which interest was payable under this section is reduced or increased, then the interest under this section shall also be reduced or increased correspondingly.

Penalty for Late Filing of Income Tax Return w.e.f 1-4-2018 (New Law)

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