A growing number of taxpayers across India have reported receiving unexpected interest demand notices from the Income Tax Department after filing updated income tax returns (ITRs). Concerned by the rising grievances, the Gujarat Chamber of Commerce and Industry (GCCI) has urged the Centre to amend provisions of the Income Tax Act to eliminate ambiguity in interest calculations.
The issue primarily relates to interest charged under Section 234B, even after taxpayers have discharged their tax liabilities while filing updated returns as per Section 140B. Many individuals who submitted updated ITRs under Section 139(8A) have been served fresh demands, leading to confusion and frustration among taxpayers.
According to GCCI's Direct Tax Committee Chairman, the root cause lies in different interpretations and methods of calculating interest. He explained:
"Taxpayers are receiving demand notices after processing updated ITRs, even though tax, interest and fees are required to be fully paid before filing under Section 140B. Ideally, no additional interest demand should arise afterward. These notices under Section 234B are creating unnecessary hardship."
GCCI emphasised that the mismatch arises because the Income Tax Department and taxpayers use different computational approaches, often due to unclear provisions in the law. This discrepancy has resulted in several taxpayers receiving notices despite complying with all tax payment requirements before filing.
The chamber has now called upon the CBDT and the Union Finance Ministry to amend the law or issue a clear clarification, ensuring that taxpayers are not penalised due to conflicting interpretations.
The business body believes that such an amendment would restore trust, reduce disputes and streamline the updated return compliance mechanism introduced to encourage voluntary disclosure.
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