Know the Penal Interest details to be paid even if Income Tax Return filing deadline Extended

Penal Interest - Income Tax Return - Taxscan

In order to provide relief to the Taxpayers affected by the COVID-19 Pandemic, the Government extended the Income Tax Return filing for the financial year 2020-21 till September 30, 2021. Further, the government has given multiple extensions to the taxpayers last year also.

However, under sections 234A, 234B and 234C of the Income Tax Act 1961, the taxpayer has to pay interest on the outstanding tax. In other words, an extension of the deadline does not provide a relief from penal interest charges that a taxpayer is supposed to pay if there is an outstanding tax liability, whether under self-assessment tax or advance tax.

Therefore, it is advisable that it is better to file your ITR and pay due tax in time to avoid these interest penalties.

Penal Interest to be paid on the extension of the ITR filing date

1. 1% Interest to be charged every month on the outstanding tax amount

The 1% interest rate will be charged every month on the outstanding tax amount as per section 234A.

It is noteworthy that for a delay of 5 or 6 days, the amount will be charged for the entire month. It is considered as a delay of one full month, even though the filing of the income tax returns is extended to September 30.

If a person has not paid advance tax or has paid 90 percent of the tax liability, he/she also has to pay an interest rate of 1 %under section 234B. The defaulter’s payment of advance tax installment is also required to pay interest under section 234C.

 2. Cases where the advance tax paid is less than the prescribed instalments

Under Section 234C, interest is levied in case the advance tax paid is less than the prescribed installments. The taxpayers need to pay an interest of 15 percent,45 percent,75 percent, and 100 percent advance tax by the 15th of June, September, December, and March. A decrease in the advance tax payment can result in a 3 percent interest in that quarter.

3. Interest where tax liability is more than Rs 1 lakh

Though the due date for filing of ITR for the assessment year 2021-22 has been extended, no relief shall be provided from the interest chargeable under Section 234A if the tax liability exceeds  Rs.1 lakh. Thus, if the 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 the original due date, that is 31 July 2021.

If the tax liability is more than Rs 1 lakh, then the interest must be paid for both the months of August and September. The interest will be levied if the self-assessment tax is more than 1 lakh. There is relief under section 234A that if the tax liability is above 1 lakh, interest will be paid on the delay in filing the income tax.

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