File your IT return now to avoid interest penalty

On September 9, a notification by the Central Board of Direct Taxes (CBDT) said, “Extension of dates shall not apply to Explanation 1 to section 234A of the (IT) Act.”

This means that if the taxpayer has not filed his ITR on or before July 31 and has to pay the tax dues to the IT department, he will be charged a monthly interest of 1% on the outstanding tax amount under section 234A. This penalty will be applicable only on those whose outstanding tax is above ₹1 lakh can be paid after deducting advance tax or TDS.

“The original due date was 31 July 2021. It was earlier extended till 30 September 2021 and now it has been extended till 31 December 2021. We must understand that interest under section 234A of the IT Act will now be charged only on the outstanding dues. The tax payable is more than Rs 1 lakh and it will be levied at the rate of 1% per month from 1st August 2021 till the date of filing of return,” explained Sujit Bangar, Founder, TaxBuddy.com.

The interest charged is simple interest and will not compound every month. To give an example, if your outstanding tax liability is ₹1.3 lakh, you have to pay ₹1,300 per month till the date of filing ITR. Since the interest is calculated on a monthly basis and starts at the beginning of each month from the original due date, even if you file your ITR on the first day of any month, you still have to pay the full interest amount for the same. Will happen. Month.

Therefore, it is advised that you pay your pending taxes, if any, at the earliest. “Even if ITR can be filed later, it is advisable to calculate tax immediately. This can help us save interest. One can file ITR anytime before December 31, after paying the outstanding tax, which is done through net banking.

The move does not affect small taxpayers who are likely to be under tax liability ₹1 Lac.