Interest for Default in Furnishing Return
Introduction
Interest at the rate of 1% per month or part thereof is levied on outstanding tax liability if an assessee fails to furnish the Income-tax return within the due date or does not file it at all.
Key Provisions
- Applicability
Interest underSection 234A applies when:
o The return is filed after the due date under Section 139(1).
o The return is not filed at all.
- Rate of Interest
o Simple interest at 1% per month or part thereof.
o Interest is computed on the outstanding tax liability.
- Period of Interest
o For delayed filing: From the day after the due date to the actual filing date.
o For non-filing: From the day after the due date to the completion of assessment.
Round-off
- The amount of tax, penalty or other sum in respect of which such interest is to be calculated shall be rounded off to the nearest multiple of Rs. 100 and for this purpose any fraction of Rs. 100 shall be ignored.
- The interest amount so computed shall also be rounded off to the nearest multiple of Rs. 10.
Special Scenarios
- Belated Filing with Full Payment Before Due Date
No interest is charged if all tax liability, including self-assessment tax, is paid before the due date, even if the return is filed late. [Circular No. 2/2015 [F.NO.385/03/2015-IT(B)], Dated 10-2-2015] - Updated Return Filing
Interest is levied from the day after the original due date to the updated return filing date on the declared self-assessment tax, where no return of income was previously filed.
An assessee shall not be required to pay interest at the time of furnishing of updated return if he has already filed the original return, revised return, or belated return for the relevant assessment year.
- Re-assessment
Interest applies if the return required by notice underSections 148 or 153A is filed late or not furnished at all.
Computation of Interest
Interest is calculated on net tax liability after deducting:
- TDS/TCS, advance tax, and self-assessment tax paid before the due date.
- Credits for MAT, AMT, and foreign tax as applicable.
Waiver of Interest
Interest cannot be waived or reduced except under specific circumstances as prescribed by the CBDT.
Recalculation of Interest
Adjustments or recalculations can occur based on appeal outcomes or rectifications or reference to Commissioner under Sections 263 or 264 or order of the Settlement Commission, the interest shall be increased or reduced accordingly. In case of increase in interest liability, the Assessing Officer will serve on the assessee a notice of demand specifying the sum payable. In case interest is reduced, the excess interest paid shall be refunded