Consequences of late filing of Income tax return(Amended by Finance Act 2016)

Here, we are discussing Consequences of late filing of Income tax return(Amended by Finance Act 2016)

  • If the taxpayer files the return of income after the specified due date, interest under section 234A will be levied. Interest is levied at 1% per month or part of a month
  • You will not be allowed to carry forward certain losses if you are filing your income tax return after the deadline.
  • You may lose interest on refund u/s 244A as delay in filing is attributable to you for the period by which you have filed late return.
  • You may be charged a penalty of Rs 5,000 if you file your income tax return after the expiry of one year of the financial year for which you are filing your income tax return.
  • Late returns are not allowed to be revised  up to Assessment year 2016-17. From Assessment year  2017-18, belated return submitted u/s 139(4) can be revised.


Please find below provisions in detail for interest  on delay filing  of Income Tax Return: 
Basic provisions

Interest under section 234A is levied for delay in filing the return of income. In other words, if the taxpayer files the return of income after the due date specified in this regard, interest under section 234A will be levied. 
Illustration

Mr. Kapoor is a doctor. His tax liability for the financial year 2015-16 amounted to Rs. 8,400. The due date of filing the return of income in his case is 31st July, 2016. On 5th August, 2016 he paid tax of Rs. 8,400 and filed his return of income. Will he be liable to pay interest under section 234A?

Interest under section 234A is levied for delay in filing the return of income. The due date for filing the return of income in the case of Mr. Kapoor is 31st July, 2016 and he has paid the tax and filed the return on 5th August 2016. Hence, he will be liable to pay interest under section 234A on the outstanding tax liability


Rate of interest
Interest under section 234A is levied for delay in filing the return of income. Interest is levied at 1% per month or part of a month. The nature of interest is simple interest. In other words, the taxpayer is liable to pay simple interest at 1% per month or part of a month for delay in filing the return of income.


Period of levy of interest under section 234A
Interest under section 234A is levied from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in case where no return has been furnished, on the date of completion of the assessment under section 144.
It should be noted that while computing the period of levy of interest, part i.e. fraction of a month is considered as full month.

Illustration

Mr. Sunil is an engineer. The due date of filing the return of income in his case is 31st July, 2016. He filed his return of income on 9th January, 2017. His tax liability for the financial year 2015-16 is Rs. 8,400 (which is paid on 9th January, 2017). Will he be liable to pay interest under section 234A, if yes then what will be the period of levy of interest?
**
The due date of filing the return of income is 31st July, 2016, and return of income is filed on 9th January, 2017 i.e. after the due date and hence, Mr. Sunil will be liable to pay interest under section 234A.

While computing interest, part of the month will be taken as full month. In this case, there is a delay of 5 months and 9 days. Part of the month i.e. 9 days will be considered as full month and hence, interest will be levied for 6 months.

Amount liable to interest under section 234A

Interest under section 234A is levied on the amount of tax as determined under section 143(1) and where regular assessment is made, the tax on total income as determined under such regular assessment as reduced by advance tax, tax deducted/collected at source, relief claimed under various sections like sections 90/90A/91 and tax credit claimed under section 115JAA/115JD.


Illustration

Mr. Kumar is running a medical store. The due date for filing the return of income in his case is 31st July. He filed his return of income on 3rd December. Tax liability of Mr. Kumar for the year is Rs. 28,400 (which is paid on 3rd December). Advance tax paid by him is Rs. 15,000 and he has TDS credit of Rs. 5,000. Will he be liable to pay interest under section 234A, if yes then how much?


Mr. Kumar has filed his return of income after the due date i.e. after 31st July and hence, he will be liable to pay interest under section 234A. Interest will be levied at 1% per month or part of the month.

The due date of filing the return of income is 31st July and the return of income is filed on 3rd December and hence, there is a delay of 4 months and 3 days. Part of the month i.e. 3 days will be considered as full month and hence, interest will be charged for a period of 5 months. Interest will be levied at 1% per month on Rs. 8,400 (*) for 5 months. Thus, interest under section 234A will come to Rs. 420.

(*) Advance tax of Rs. 15,000 and TDS of Rs. 5,000 are to be deducted from the tax liability of Rs. 28,400, hence, net liability after deducting advance tax and TDS will come to Rs. 8,400. Thus, interest will be levied on Rs. 8,400.


Published by Business So Simple

Hi, I am business consultant working with a team of Chartered Accountants, Company Secretaries, Lawyers & MBAs. I am promoter of " Make Your Business So Simple" "Make Education So Simple" Make Life So Simple" Make Legal Affairs So Simple".

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