Taxpayers may have to pay interests on outstanding income tax exceeding Rs 1 lakh
The government on Saturday extended deadlines for furnishing various ITRs and audit reports as a relief to taxpayers from Covid-19 pandemic, but there is no clarification on the aspect of interest waiver.
Taxpayers having tax outstanding exceeding Rs 1 lakh should not wait for the last date to file income tax returns (ITR) as they could be charged interest on the unpaid tax amount even as the government on Saturday extended the deadline for filing ITRs, officials and experts said.
The government on Saturday extended deadlines for furnishing various ITRs and audit reports as a relief to taxpayers from the Covid-19 pandemic, but there is no clarification on the aspect of interest waiver. Unless clarified explicitly, taxpayers would have to pay interest on the outstanding amount with effect from July 2020, at least five tax experts and officials said requesting anonymity.
“The CBDT (Central Board of Direct Taxes) has extended the due date for filing of the ITR for the Assessment Year 2020-21 to 31-12-2020 for non-audit cases and 31-01-2021 for audit cases, but no relief has been provided from the interest chargeable under Section 234A if the tax liability exceeds Rs. 1 lakh,” Naveen Wadhwa, DGM at tax consultancy Taxmann said. CBDT, an arm of the Union finance ministry, regulates matters related to the income tax.
The recently amended income-tax law provides for the levy of interest at the rate of 1 percent per month on the outstanding tax liability for the period of default in filing of return of income. The recently amended law - the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 – exempts small taxpayers, such as salaried class and pensioners having a single source of income, from interest burden during the extended period provided their individual tax liabilities do not exceed Rs 1 lakh, people mentioned above said.
“The CBDT will issue a necessary notification about the extension of the deadlines in due course, which may clarify issues such as interest charged on the outstanding tax amount,” one of the officials, who works in the finance ministry, said. Email queries sent to the finance ministry and the CBDT went without any response.
If the total tax deposited by way of tax deducted at source (TDS) and advance-tax fall short of the actual tax liability, the deficiency in payment of tax is met by payment of self-assessment tax, Wadhwa said.
“Thus, if self-assessment tax liability of a taxpayer exceeds Rs 1 lakh, he would be liable to pay interest under section 234A from the expiry of original due dates, i.e., 31-07-2020 or 31-10-2020. The interest under section 234A shall not be levied if the self-assessment tax liability of taxpayer does not exceed Rs 1 lakh and ITR is filed within the extended due date, i.e., 31-12-2020 or 31-01-2021,” he said.
Archit Gupta, founder and chief executive officer (CEO) of financial technology platform ClearTax, said, “Please note, no formal notification is issued by the (income-tax) department so far. Responses are based on the press release (issued on October 24).”
Kapil Rana, the chartered accountant and founder of HostBooks Ltd, a cloud-based accounting platform, said that small taxpayers whose, the self-assessment tax liability is up to Rs 1 lakh, would not be required to pay interest on the outstanding amount. “Other taxpayers who do not fall under this category shall have pay interest under Section 234A from the due date as mentioned under Income Tax Act... as may be applicable,” he said.