PremiumIn order to provide relief to taxpayers, the government has extended the deadline for filing income-tax return (ITR) till 30 September for FY21 due to the ongoing pandemic. The government had given multiple such extensions to taxpayers last year also, considering the hardship caused by covid-19.
However, the extension of the deadline doesn’t provide a relief from penal interest charges that a taxpayer is supposed to pay if there is an outstanding tax liability, whether under self-assessment tax or advance tax.
A taxpayer is required to pay interest in case of delay in paying tax under three sections—234A, 234B and 234C—of the Income Tax Act, 1961.
Interest under Section 234A is levied in case of delay in filing ITR. So, suppose the deadline to file ITR is 31 July 2021 and a person files ITR on 5 August, interest will be levied at the rate of 1% per month on the tax amount due. Part of the month will be considered a full month. So, in this case despite the fact that there is a delay of only five days, interest will be charged for the entire month.
However, like last year, the government has provided relief under Section 234A to those taxpayers whose self-assessment tax is more than ₹1 lakh. Interest will be levied in case the tax liability of the person is more than ₹1 lakh. So, even if the deadline is extended till 30 September, you will have to pay interest at the rate of 1% for August and September, if your tax liability is more than ₹1 lakh.
“Though the due date for filing of ITR for the assessment year 2021-22 has been extended, no relief shall be provided from the interest chargeable under Section 234A if the tax liability exceeds ₹1 lakh. Thus, if self-assessment tax liability of a taxpayer exceeds ₹1 lakh, he would be liable to pay interest under Section 234A from the expiry of the original due date, that is 31 July 2021,"said Tarun Kumar, a New Delhi-based chartered accountant.
If the date is further extended, and you delay filing of ITR, interest will continue to be levied. Therefore, it will be advisable to file ITR as soon as possible. However, this year, the tax department has launched a new tax filing portal which is facing issues and is not fully operational, which is creating problems for filers.
“This year, as taxpayers are facing difficulties in filing ITR on the income tax portal, a relief under Section 234A should be provided to all assessees irrespective of the outstanding tax liability," said Prakash Hegde, a Bengaluru-based chartered accountant.
Under Section 234B, one is required to pay interest at the rate of 1% if the taxpayer has not paid advance tax or has paid less than 90% of the tax liability. Under Section 208, a person whose tax liability for the year is ₹10,000 or more is liable to pay advance tax. In case the person fails to do so, he or she will be liable for interest under Section 234B at 1% per month or part of the month from April till the date of payment of tax.
Even if you are a salaried person whose tax liability is more than ₹10,000, you are liable to pay advance tax. However, in case of salaried person, the advance tax is taken care of by the employer by the way of deducting the TDS (tax deducted at source). But if you have any other income that you may not have disclosed to your employer, you will have to pay advance tax separately for the same. Only senior citizens who don’t have any business income are exempted from paying advance tax. So, even if you are delaying filing ITR, it will be better to pay advance tax at the earliest.
Under Section 234C, interest is levied in case the advance tax paid is less than the prescribed instalments. So, a taxpayer is required to pay 15%, 45%, 75% and 100% by 15th day of June, September, December and March, respectively. “In case there is a shortfall in advance tax payment, interest at the rate of 3% is charged for that particular quarter," said Hegde. Therefore, it is better to file your ITR and pay due tax in time to avoid these interest penalties.
