Paying income tax on time is a liability of every taxpayer. However, many individuals and businesses are often unaware of the consequences and other situations of late payment or delayed filing of income tax returns. To ensure timely compliance, the Income Tax Act of India has laid down various provisions that impose interest as penalties for delays and defaults. These are Sections 234A, 234B, and 234C.
In this article, we will explain what these sections mean, how they are applied, and their implications in simple language.
1. What is Section 234A? – Interest for Delay in the Filing of Income Tax Return
Section 234A is applicable when a taxpayer files an income tax return (ITR) after the due date. This section imposes interest at the rate of 1% per month (or part of a month) on the amount of tax that remains unpaid.
Key Points:
- Applies only if tax is due.
- Interest is levied from the due date of filing the return till the actual or prescribed date of filing.
- For Instance, if the due date is prescribed 31st July and the return is filed on 30th September, interest will be charged for 2 months.
Implication:
Filing ITR after the due date not only attracts late filing fees (Section 234F) but also levies interest under Section 234A as prescribed if you owe taxes. So, it’s always better to file your return on time.
2. What is Section 234B? – Interest for Non-payment or Short Payment of Advance Tax
Section 234B is applicable if:
- Taxpayer fails to pay the advance tax, or
- Pays less than 90% of the total tax liability as advance tax.
In such cases, the taxpayer is responsible for paying 1% interest per month from 1st April of the assessment year to the date of actual tax payment.
Example:
If your total tax payable for the year is ₹1,00,000 and you paid only ₹70,000 as advance tax, you have paid only 70% of your tax dues. Since it is less than 90%, Section 234B will apply to the unpaid amount of ₹30,000.
Implication:
Failing to estimate your income correctly and underpaying advance tax can cost you additional interest under Section 234 B. Proper tax planning during the year helps avoid this.
3. What is Section 234C? – Interest for Deferment of Advance Tax Instalments
Section 234C applies when a taxpayer does not pay advance tax in the correct instalments as prescribed by the Income Tax Department.
Due Dates and Installment Requirements:
For individual taxpayers:
- 15th June – 15% of the total advance tax
- 15th September – 45% of total advance tax (cumulative)
- 15th December – 75% of total advance tax (cumulative)
- 15th March – 100% of the total advance tax
If you fail to pay the required amount by these dates, you will be charged interest under Section 234C at 1% per month on the shortfall.
Implication:
Even if you are paying your full advance tax, not paying in the correct instalments will attract interest. So, timely payments as per the schedule are essential.
How Are These Interest Charges Calculated?
Let’s take a quick overview:
| Section | Reason for Interest | Rate | Period of Interest |
| 234A | Late filing of return | 1% per month | From due date to filing date |
| 234B | Non-payment or shortfall in advance tax | 1% per month | From 1st April to the actual date of tax payment |
| 234C | Delay in paying advance tax instalments | 1% per month | On shortfall amount for each due date missed |
Conclusion
Sections 234A, 234B, and 234C are designed to encourage taxpayers to make timely payments and file taxes. These interest penalties are not penalties in the traditional sense, but a way for the government to compensate for the delay in receiving taxes.
By planning your taxes properly, paying advance tax on time, and filing your return before the due date, you can avoid these interest charges. Being aware of these sections can help you save your money and stay compliant and aware of tax laws.
