Interest Payable Under Section 234A of the Income Tax Act, 1961

The Income Tax Act mandates every taxpayer needs to file Income Tax Returns (ITR) if their income exceeds the minimum taxable income limit. In case of delays or defaults in ITR filing, you will need to pay interest and penalties.

Section 234A of the Income Tax Act outlines the interest penalty applicable in the following conditions:

Delayed income tax returns
Updated returns
Returns filed in response to a notice issued u/s 142 (1)

How is Section 234A Different from Sections 234B and 234C

Section 234 has multiple subsections, among which 234A/B/C are for interest levied on your tax liability. Since all three are for interest penalty, understanding their differences can help you gauge which section applies to you.

Check the following table to know when these subsections of Section 234 of the Income Tax Act apply:

Sub-section	When Its Provisions Apply
Section 234A	In case of a delay in filing Income Tax Returns
Section 234B	Default in advance tax payment
Section 234C	Delay in payment of advance tax instalments

Period of Interest Computation Under Section 234A

As mentioned, the interest is levied on your tax liability until you file your return. Here, a crucial point to remember is that part or days of a month are considered as a whole to calculate your interest liability.

This means that if you file your income tax return after a delay of 5 months and 17 days, the period for calculating interest u/s 234A will be 6 months.

Illustration of Computation of Interest Under Section 234A

Under Section 234A, interest calculation is done with the simple interest formula. The formula to calculate the interest liability on your delayed filing is as follows:

Interest = Net tax liability X period of delay X 1%

Here,

Net tax liability is your liability after deducting advance tax and other tax relief from your gross tax liability
Period of delay is the number of months by which you have filed a delayed return
1% is the interest rate applicable per month

Based on this formula, here is an illustration of the calculation under Sec 234A of the Income Tax Act. Suppose your net tax liability is ₹1.5 Lakhs, and the due date for filing the income tax return is July 31. However, you filed the return on December 15.

Here, you have delayed your return by 4.5 months, which will get rounded up to five months. With the help of the formula, your interest under Section 234A will be = 1,50,000 X 5 X 1%, which amounts to ₹7,500.

If you have unpaid tax dues, the best way to avoid a higher penalty is to file the return at the earliest.

What is Income Tax Section 234A?

This section is a subsection of Section 234. It outlines the provisions for levying interest on the delayed filing of income tax returns.

How to check payable interest under Section 234A?

To know your Section 234A interest liability for delayed income tax return filing, you can use the simple interest formula. Here, interest payable = Net tax liability X delayed period X 1%. Alternatively, you can visit the income tax portal to calculate your interest liability.

What is Section 234A, 234B, 234C of the Income Tax Act?

Section 234A/B/C are subsections of Section 234, which stipulate the interest penalty on delayed filing of returns and advance tax payments.

What is the interest rate under Income Tax Section 234A?

The net tax payable is calculated after adjusting advance tax payments, TCS, TDS, tax relief, and MAT credit.

What is the due date for the 234A interest payment?

There is no due date for payment of 234A interest. However, you must file your return by July 31 to avoid paying interest on account of delayed payments. In case you need to submit a tax audit report, the due date for filing returns is October 31.

What is Section 234A in case of an extended due date?

Section 234A imposes a 1% monthly interest on delayed filing of income tax returns, even if the due date is extended.

What is the penalty under Section 234A in income tax?

Section 234A imposes a 1% monthly penalty on the unpaid tax amount for filing income tax returns after the due date. The penalty is calculated from the due date to the actual filing date.

How is Section 234A interest calculated?

Section 234A charges 1% interest per month on the unpaid tax amount for delayed filing of income tax returns. For example, if your total tax due is ₹10,000 and you file your return 3 months late, the interest would be: ₹10,000 * 1% * 3 months = ₹300. Hence, you would owe an additional ₹300 as interest for the delay.