Taxpayers still need to pay interest despite extension of filing dates
IANS 20 September 2021
The government may have extended the due date for filing Income Tax returns on account of the difficulties being reported by the taxpayers in the electronic filing of returns owing to the glitches in the Tax Portal, but taxpayers may still be required to pay additional interest at the rate of 1 per cent per month despite filing the return in the extended period in case the balance tax payable exceeds Rs 1 lakh.
As per the clarification appended to the Circular extending the dates for filing tax returns, it has been clarified that the extension of the due date shall not be applicable in respect of provision of section 234A.
The implication of this will be that despite filing the return in the extended period, the taxpayers shall be required to pay additional interest at the rate of 1 per cent per month from the original due date of filing tax return i.e. July 31, 2021 in the case of ordinary taxpayers and October 31 in the case of taxpayers who are required to get their accounts audited, in case the balance amount of tax payable i.e. self-assessment tax payable exceeds Rs 1 lakh.
Though the government has extended the due date of filing return but has specifically provided that despite extension of due date, interest at the rate of 1 per cent shall be required to be paid in case the balance tax payable exceeds Rs 1 lakh.
"Technically, the only relief by this Circular is non-levy of fee of Rs 5,000 for late filing of return under section 234F of the Act. It may be relevant to point out that in the case of those taxpayers who are liable to pay advance tax and where such advance tax falls short of the 90 per cent of assessed tax i.e. tax on total income as reduced by TDS, such taxpayers are also required to pay normal interest at the rate of 1 per cent per month under section 234B of the Act from April 1," eminent tax expert Ved Jain said.
"Accordingly, the implication of this extension will mean that a taxpayer who is liable to pay advance tax will have to pay interest at the rate of 2 per cent per month (1 per cent under section 234B and 1 per cent under section 234A) from the original due date of filing of return i.e. July 31 or October 31, as the case may be," he added.
Further, even the taxpayers who are not required to pay advance tax but have a self-assessment tax liability exceeding Rs 1,00,000 will also be required to pay interest at the rate of 1 per cent from the original due date i.e. July 31 or October 31, as the case may be, under section 234A of the Act.
It is to be noted that interest under section 234A at the rate of 1 per cent in case of late filing of return is in fact a penalty. Before the amendment made by the Direct Tax Laws (Amendment) Act, 1987, there used to be a penalty at the rate of 2% per month for late filing of return under section 271(1)(a) of the Act.
The above Amendment Act in order to simplify the tax provision has substituted this penalty by interest under section 234A of the Act.
Accordingly, to levy such interest, which in fact is a penalty for late filing of return, when the due date has been extended, not because the taxpayer was not prepared to file the return but because of the difficulties in electronic filing of the return on the Tax Portal, is not justified, Jain said.
It may be relevant to note that in case self-assessment tax is paid on before the original due date, then there shall be no liability to pay interest under section 234A of the Act. From this, it follows that the intention of the CBDT is to extend only the due date of filing of return but not to extend the date of making payment of self-assessment tax.
Several taxpayers have faced delays in timely filing of returns due to glitches in the new tax portal.
In the above circumstances, when the delay in payment of tax cannot be attributed to the taxpayer, it would not be justified to levy this additional interest, which is more in the nature of a penalty, at the rate of 1 per cent per month from the due date of filing return, said Jain.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
Kamal Garg
4 weeks ago
To my knowledge, every tax payer who has a tax liability has to pay advance tax if the total tax liability exceeds Rs. 5000 in a year (in case it is less than Rs. 5000, then she can pay the same under "self-assessment tax" at the time of filing of return). And therefore payment of interest is on non-payment of advance tax at the right/appointed date/time.
Filing of return is different and as rightly pointed out, only the due date of filing return has been changed/increased and not the payment of advance tax/tax/self-assessment tax.
Can some body clarify on this point.
4 weeks ago
Advance tax provisions and interest implication thereon is not at all justified. How anyone can be expected to know his annual income in advance in the times of so much market volatility?
Replied to nothakkar comment 4 weeks ago
I wrote it often to empty heads in ministry long ago. If you are serious please raise it as Public Grievance in Central Public Grievances Monitoring & Redress System) CPGRAMS Directorate if Administrative Reforms & Public Grievances (DARPG)
. Free registration. Reply is to be given in 45 days but I got none for two yrs even after phoning. Why cannot Govt wait for 15 days in March ? It must not ask for Advance tax each Quarter. Pl also write to ICAI, ACS, ICWAI, chambers of commerce, newspapers,
MPs, ministers, PM, President, etc.
4 weeks ago
I agree Totally with Mr Jain. The New Portal has given us nightmares. Actually speaking the Issue of Sec 234A should be taken up by Institute of Chartered Accountants. They should bring this issue on behalf of every citizen who are penalized by CBDT's immature application of Penalty. I am a senior citizen and I will have to pay Rs.3000 as Interest u/s 234A just for no fault of mine. Since July I was trying to file the IT return but it was a big headache to operate the new portal. I have only interest Income and why should I bear the loss of Rs. 3000? It is very hard for us to earn money in this pandemic situation.
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