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Section 234A - Delay in Filing Tax Returns Under IT Act

Updated on June 22, 2022 , 5037 views

In order to help citizens, maintain a timeline to pay Taxes, the income tax department has laid down guidelines for strict compliance. Section 234 of the Income Tax Act, 1961, deals with penalties and interest rates charged for delay in paying taxes. This is the first part of the three-part series of Section 234 as Section 234a, Section 234B and Section 234C.

Section 234A

There are three types of interests charged as mentioned below:

Section 234A- Delay in Filing Tax Return

Section 234B- Delay in Payment of Advance Tax

Section 234C- Deferred Payment of Advance Tax

What is Section 234A?

If you are late in filing an Income Tax Return, you will be liable to pay a penalty under Section 234A. The due date of submitting your tax return is on or before 31st July of a financial year. If you miss to submit it by the stipulated timeline, you will have to pay interest at 1% per month on the outstanding tax amount.

Note that the interest will be calculated from the due date applied to filing a tax return in a financial year to the date you actually file it.

However, there are circumstances that may cause a delay in filing return. They are mentioned below:

  • Maybe you have taxes that outstanding and yet to be paid to the Income Tax Department
  • Maybe your taxes have been paid on time with refund expected or taxes yet to be paid
  • Maybe you are eligible for a Tax Refund from the IT department

If your circumstance is the same as mentioned in the 2nd and 3rd point, you may not have to worry about a penalty. However, this is also based on the discretion of the Assessing Officer.

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Example of Penalty Under Section 234A

Gauri works with an IT firm. Due to delayed payment in salary, she couldn't pay her taxes on time. This went on to accumulate her total outstanding tax for the financial year at Rs. 5 lakhs under Section 234a for AY 2020-21.

After getting her outstanding salary, Gauri rushed to pay her tax on 31st March 2019, which she was supposed to pay on 31st July 2018. She is late for 8 months.

The interest applicable on her outstanding tax is 500,000*1%*7 = 40,000. This Rs. 40,000 is above the tax amount that Gauri has to pay. If she does not file a tax return at all, she will be liable to pay 1% interest till the end of the assessment year.

234A Interest for AY 2020-21- Government Rules During Coronavirus

Since the outbreak of the Coronavirus pandemic, taxpayers are facing a challenge to pay their taxes on time. The government of India issued a notice on 24th June 2020 that there will be an extension of time limit for tax payment falling between 20th March to 31st December 2020.

The notification has stated that the government has extended the deadline for filing return of income tax for the financial year 2019-20 (A.Y. 2020-21) from the original due date of 31st July 2020 (for non-corporate taxpayers not liable to tax audit) and 31st October 2020 (taxpayers liable to audit) to 30th November 2020.

Later it was clarified that there will be no extension of the payment date for self-assessment tax for those who have self-assessment Tax Liability exceeding Rs. 1 lakh. The self-assessment taxpayers have to pay their taxes on the due dates as specified in the Income Tax Act 1961 and any delayed payment would be attracting interest as mentioned in Section 234A of the Income Tax Act.

Conclusion

Paying your tax on time is a must, if you want to save on your money and also keep a good Credit Score. Follow the government’s rules for the payment of taxes during the novel coronavirus pandemic to be on time!

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