Interest and Fees under the Income-tax Act
Introduction
Interest and fees are compensatory charges levied for defaults under the Income-tax Act. Interest is applied for delays in tax payments, while fees are levied for non-compliance with filing requirements. These are charged automatically without prior notice.
Default in filing statements
- Income-tax Return Filing
o Interest (Section 234A):
Delay in filing return: 1% per month or part thereof on unpaid tax from the due date to the actual filing date.
Non-filing of return: 1% per month or part thereof on unpaid tax from the due date to the date of completion of assessment.
o Fee (Section 234F):
Rs. 1,000 if total income ≤ Rs. 5,00,000.
Rs. 5,000 if total income > Rs. 5,00,000.
No fee is payable where assessee is not liable to furnish his return of income.
- TDS/TCS Statements
o Fee (Section 234E): Rs. 200 per day of default, capped at the TDS/TCS amount.
Defaults in Tax Payments
- Advance Tax (Sections 234Band 234C):
o Section 234B: 1% per month on unpaid tax from April 1 to the date of regular assessment if advance tax paid < 90% of assessed tax.
o Section 234C: 1% per month for underpayment in specific instalments of advance tax [ 15%,45%,75% and 100%]
- TDS/TCS Deduction or Deposit
o Section 201: 1% per month for failure to deduct tax and 1.5% per month for failure to deposit the tax deducted.
o Section 206C: 1% per month for failure to collect tax and 1.5% per month for failure to deposit the tax collected..
- Tax on accreted income of trust
o Failure to pay tax on accreted income under Section 115TE by trusts or institutions results in interest at 1% per month.
Interest on refunds
- Delayed Refund by Department (Section 244A):
0.5% per month on the refund amount. The period for which interest is payable shall depend on the type of tax out of which the refund arises and the date of furnishing return of income. - Excess Refund to Assessee (Section 234D):
0.5% per month on the excess refund from the date of grant of refund to the date of completion of regular assessment.
Aadhaar and PAN Compliance
- Failure to Intimate Aadhaar (Section 234H):
Fee of up to Rs. 1,000 for non-compliance underSection 139AA.
Waiver of Interest
The Chief Commissioner or Director General may waive or reduce interest under Sections 234A, 234B, 234C, or 201 in the prescribed circumstances upon satisfying certain conditions.