Tax filing deadline extended. That doesn’t mean relief from interest penalties

Like last year, the government has provided relief under Section 234A to taxpayers whose self-assessment tax is up to ₹1 lakh. Interest will be levied in case the tax liability of the person is more than ₹1 lakh

Tax filing deadline extended. That doesn’t mean relief from interest penalties


To provide relief to the taxpayers amid the covid-19 pandemic, the government has extended till 30 September the deadline for filing income tax returns (ITR) for FY20-21.

However, this doesn’t provide relief from the penal interest charges which a taxpayer is supposed to pay in case there is an outstanding tax liability whether under self-assessment tax or advance tax.

There are three sections-- 234A, 234B and 234C -- in the Income Tax Act 1961, under which a taxpayer is required to pay interest in case of delay in paying tax.

Interest under Section 234A is levied in case of delay in filing the ITR. Suppose the deadline for filing ITR is 31 July 2021 and a person files ITR on 5 August, interest will be levied at the rate of 1% per month on the tax due amount. Part of the month will be considered a full month. Despite the fact that there is a delay of 5 days, interest will be charged for the entire month.

However, like last year, the government has provided relief under Section 234A to taxpayers whose self-assessment tax is up to 1 lakh. Interest will be levied in case the tax liability of the person is more than 1 lakh. So, even if the deadline is extended till 30 September, you will have to pay interest at the rate of 1% for August and September, if your tax liability is more than 1 lakh. If the date is further extended and you delay filing of ITR, interest will continue to be levied.

Under Section 234B, one is required to pay interest at the rate of 1% if the taxpayer has not paid advance tax or has paid less than 90% of the tax liability. Under Section 208, if a person's tax liability for the year is 10,000 or more, he or she is liable to pay advance tax. In case the person fails to do so, he or she will be liable for interest under Section 234B at 1% per month or part of the month from April till the date of payment of tax. So, even if you are delaying filing ITR it will be better to pay advance tax as soon as possible.

Under Section 234C, interest is levied in case the advance tax paid is less than the prescribed installments. So, a taxpayer is required to pay 15%, 45%, 75% and 100% by the 15th of June, September, December and March month respectively. "In case there is a shortfall in advance tax payment interest at the rate 3% is charged for that particular quarter," said Hegde.

This year, the tax department has launched a new tax filing portal but taxpayers are facing issues in filing ITR.

“This year, as taxpayers are facing difficulty in filing ITR on the income tax portal, a relief under Section 234A should be provided to all assesses irrespective of the outstanding tax liability," said Prakash Hegde, a Bengaluru- based chartered accountant.

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