Interest levy under three sections 234A, 234B and 234C

| Last updated: 27 July 2021

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Quick Summary

Even though the deadline for filing Income Tax Returns (ITR) for FY 2020-21 was extended to September 30, 2021, there's no relief for delayed tax payments. Taxpayers must pay interest on outstanding tax under Sections 234A, 234B, and 234C of the Income Tax Act. Section 234A applies to late filing of returns, Section 234B covers defaults in paying advance tax, and Section 234C deals with deferring advance tax payments.

Income Tax Return (ITR) filing last date has been extended to September 30, 2021, due to the COVID-19 pandemic. The deadline has been announced by the Central government for filing ITR for Financial Year 2020-21 but Central Government has not announced any relief, in case of delay in paying the income tax or if there has been an outstanding. As such, the taxpayer is required to pay interest on the outstanding tax, under three sections 234A, 234B and 234C of the Income Tax Act 1961.

Reason for levy interest

Section 234A: Default in furnishing return of Income
Section 234B: Default in payment of Advance tax
Section 234C: Deferment of Advance tax

Interest on Late ITR Filing: Sections 234A, 234B, 234C

Section 234A

According to proviso 234A, Where the return of income for any Assessment year is furnished after the due date specified in section 139(1) or is not furnished the assessee shall be liable to pay simple Interest @ 1% for every month or part of a month.

If your self-assessment tax is up to Rs 1 lakh then you will get a relief under section 234A. But if the tax liability is more than Rs 1 lakh, you will have to pay interest on the delay.

Section 234B

Similarly, under section 234B, if a taxpayer has not paid advance tax or has paid less than 90 per cent of the tax liability, then he will also have to pay interest at the rate of 1 percent.

Where in any financial year, an assessee who is liable to pay advance tax u/s. 208 has failed to pay such tax or the advance tax paid by such assessee is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @ 1% for every month or part of a month.

Assessee have to pay 15 per cent, 45 per cent, 75 per cent and 100 per cent of advance tax by the 15th of June, September, December and March.

Section 234C

Where the advance tax paid by assessee on its current income on or before 15th June, 15th September, 15th December is less than 15%, 45% and 75% respectively on the returned income, assessee shall be liable to pay simple interest at the rate of 1% per month for a period of three months on the amount of the shortfall.

Where the whole amount of advance tax paid by any assessee on or before 15th March is less than the tax due on the income returned then the assessee shall be liable to pay simple interest @1% on the amount of shortfall from the tax due on the returned income.