Section 234A of Income Tax - Interest on default in furnishing return of Income

SECTION 234A OF INCOME TAX - INTEREST ON DEFAULT IN FURNISHING OF INCOME TAX RETURN

Conditions when Interest under Section 234A is payable :

1.Interest u/s 234A is payable only when the Return of Income is either not furnished within the due date or not furnished at all. i.e. If you have not filed your Return of Income or not filed within the due date as per section 139(1) of the Income Tax Act, then Interest u/s 234A is leviable.

2. It is also levied when there is a notice issued u/s 142(1) and in response to the same, either no return is furnished or it is furnished after the due date as mentioned in the notice.

Rate of Interest payable and on which amount it is payable

1.The rate of Interest u/s 234A is 1% for the month or part of every month starting from the due date of furnishing of return of income till the date on which the return is furnished. In case no return has been furnished, the interest continues till the date of assessment u/s 144. (Best judgment assessment)

2.The interest u/s 234A is payable on the amount of tax which is determined u/s 143(1) or as per regular assessment less the amount of TDS and advance tax which has been already paid. Also, any relief claimed u/s 89, 89A, 90, 91 and also tax credit claimed u/s 115JAA to 115JD is also reduced from the total tax.

3.The interest will be further reduced if any interest has been paid along with the tax paid u/s 140A i.e. self asstt. tax.

For Example, Mr. Aniket has a total tax payable for the F.Yr.2020-21 of Rs. 125000/-. Out of the above Rs.50000/- has been deducted at source i.e. TDS and Rs. 50000/- has been paid as advance tax before 31st March,21. Mr. Aniket filed his return of Income on 28th Feb.2022 whereas the due date (extended) of filing was 31st Dec. 2021. How will the interest u/s 234A be calculated and on which amount?

The total tax liability of Mr. Aniket = 125000

Less : TDS & Advance Tax =100000

Net tax payable =25000

Interest u/s 234A will be levied on Rs.25000 from 1st Jan. to 28th Feb. i.e. 2 months @ 1% per month i.e. 25000*2% =500

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