The last date to file income tax return for the financial year 2020-21 has been extended to September 30, 2021 to provide relief to the taxpayers amid the second wave of the COVID pandemic. But the extension in deadline does not mean you get relief from penal interest charges, which is required to be paid in case there is an outstanding tax liability whether under self-assessment tax or advance tax.

Typically a taxpayer is required to pay interest on due tax, in case of a delay in filing ITR, under three sections– 234A, 234B and 234C — in the Income Tax Act 1961.

As per Section 234A, interest is levied in case of delay in filing the ITR. Suppose the deadline for filing ITR is July 31, 2021 and you file ITR on August 8, 2021, interest will be levied at the rate of 1% per month on the tax due amount. In this case interest will be charged for one month as part of the month will be considered as a full month. 

However, those taxpayers, whose self-assessment tax is up to Rs1 lakh, have been provided relief under Section 234A. But interest will be levied in case the tax liability of the person is more than Rs 1 lakh. So, even if the deadline is extended till September 30, you will have to pay interest at the rate of 1% for August and September, if your tax liability is more than Rs 1 lakh. If the date is further extended and you delay filing of ITR, interest will continue to be levied.

Under Section 234B, a taxpayer is required to pay interest at the rate of 1% if he/she has not paid advance tax or has paid less than 90% of the tax liability. Section 208 of the Income Tax Act 1961, says if a person’s tax liability for the year is Rs 10,000 or more, he or she is liable to pay advance tax. In case the person fails to do so, he or she will be liable for interest payment under Section 234B at 1% per month or part of the month from April till the date of actual payment of tax.

Section 234C deals with interest to be levied on defaulters of advance tax instalment payments. Worth mentioning here is that a taxpayer is required to pay 15%, 45%, 75% and 100% of advance tax by the 15th of June, September, December and March month respectively. In case there is a shortfall in advance tax payment, interest at the rate 3% is charged for that particular quarter.