The Income Tax Act, 1961, mandates that individuals and organizations file their tax returns within the prescribed due date. Failing to file your income tax return on or before the due date attracts a penalty under Section 234A of the Income Tax Act. In this blog, we will take a closer look at Section 234A of the Income Tax Act and its implications for taxpayers in AY 2021-22.
What is Section 234A of the Income Tax Act?
Section 234A of the Income Tax Act deals with the interest payable by the taxpayer for late filing of the income tax return. The interest is calculated at the rate of 1% per month or part of the month from the due date of filing the return till the date of actual filing of the return. The interest is calculated on the amount of tax that is payable after deducting the advance tax, TDS, and other taxes paid.
Who is liable to pay interest under Section 234A?
Any taxpayer who files his/her income tax return after the due date is liable to pay interest under Section 234A of the Income Tax Act. This includes individuals, Hindu Undivided Families (HUFs), partnership firms, LLPs, companies, and any other entity that is required to file an income tax return.
When is interest levied under Section 234A?
Interest under Section 234A is levied in the following situations:
- If the taxpayer files his/her return after the due date, which is usually July 31st of the relevant assessment year (AY), for non-audit cases.
- If the taxpayer files his/her return after the due date, which is usually September 30th of the relevant AY, for audit cases.
It is important to note that the due date for filing income tax returns for AY 2021-22 has been extended to December 31, 2021, for individuals and HUFs who are not subject to tax audit.
How is interest under Section 234A calculated?
The interest under Section 234A is calculated at the rate of 1% per month or part of the month, which is calculated from the due date of filing the return till the actual date of filing the return. The interest is calculated on the amount of tax that is payable after deducting the advance tax, TDS, and other taxes paid.
For example, if the due date for filing the return is July 31st, and the taxpayer files the return on November 30th, the interest would be calculated for four months (August, September, October, and November) at 1% per month. If the tax payable after deducting advance tax, TDS, and other taxes paid is Rs. 1 lakh, the interest payable under Section 234A would be Rs. 4,000 (1% of Rs. 1 lakh for 4 months).
Conclusion
Filing income tax returns on time is crucial to avoid interest and penalties under Section 234A of the Income Tax Act. Taxpayers should ensure that they file their returns before the due date to avoid paying interest on late filing. It is important to note that the due date for filing income tax returns for AY 2021-22 has been extended to December 31, 2021, for individuals and HUFs who are not subject to tax audit.
Other Related Blogs: Section 144B Income Tax Act
Frequently Asked Questions (FAQs)
Q.1 What is Section 234A of the Income Tax Act?
Answer: Section 234A of the Income Tax Act deals with the interest payable by the taxpayer for late filing of the income tax return.
Q.2 Who is liable to pay interest under Section 234A?
Answer: Any taxpayer who files his/her income tax return after the due date is liable to pay interest under Section 234A of the Income Tax Act. This includes individuals, Hindu Undivided Families (HUFs), partnership firms, LLPs, companies, and any other entity that is required to file an income tax return.
Q.3 When is interest levied under Section 234A?
Answer: Interest under Section 234A is levied when the taxpayer files his/her return after the due date, which is usually July 31st of the relevant assessment year (AY), for non-audit cases. For audit cases, the due date is usually September 30th of the relevant AY.
Q.4 What is the rate of interest charged under Section 234A?
Answer: The rate of interest charged under Section 234A is 1% per month or part of the month, which is calculated from the due date of filing the return till the actual date of filing the return.
Q.5 How is interest under Section 234A calculated?
Answer: Interest under Section 234A is calculated on the amount of tax that is payable after deducting the advance tax, TDS, and other taxes paid. The interest is calculated at the rate of 1% per month or part of the month, which is calculated from the due date of filing the return till the actual date of filing the return.
Q.6 Is there any penalty for late filing of income tax return?
Answer: Yes, there is a penalty for late filing of income tax return. Under Section 234F, a penalty of up to Rs. 10,000 may be levied for late filing of income tax return.
Q.7 Can the interest under Section 234A be waived off?
Answer: No, the interest under Section 234A cannot be waived off. However, the income tax department may waive off or reduce the penalty under Section 234F, depending on the circumstances of the case.
Q.8 What is the due date for filing income tax returns for AY 2021-22?
Answer: The due date for filing income tax returns for AY 2021-22 has been extended to December 31, 2021, for individuals and HUFs who are not subject to tax audit.
Q.9 Can I file my income tax return after the due date?
Answer: Yes, you can file your income tax return after the due date. However, you will be liable to pay interest under Section 234A and may also be subject to penalty under Section 234F.
Q.10 How can I avoid paying interest under Section 234A?
Answer: You can avoid paying interest under Section 234A by filing your income tax return before the due date.
