Section 234A of the Income Tax Act, 1961 deals with interest charged for delay in furnishing the income tax return (ITR) beyond the due date prescribed under Section 139(1).
It is a compensatory interest imposed on taxpayers who fail to submit their ITRs on time and still have outstanding tax payable. The intent behind this provision is to encourage timely compliance and discourage defaulters who delay filing returns even after earning taxable income.
⛔It is not a penalty, but a mandatory interest to compensate the government for the delay in receiving tax revenue.
Applicability of Section 234A
Section 234A becomes applicable when all the following conditions are satisfied:
- The return of income is not filed within the prescribed due date under Section 139(1).
- Tax is payable on the total income as reduced by:
- Advance tax paid
- TDS/TCS
- Relief under Sections 89, 90, 90A, or 91
- MAT credit under Section 115JAA or 115JD
- The taxpayer files the return after the due date, or doesn’t file the return at all.
Example 1: Return filed after due date with tax payable
- Tax liability (after TDS and Advance Tax): ₹25,000
- Due date for filing return: 31st July 2025
- Actual filing date: 15th October 2025
- Delay: August, September, October = 3 months
- Interest = ₹25,000 × 1% × 3 = ₹750
Computation of Interest under Section 234A
📌 Formula:
Interest = (Net Tax Payable) × 1% × (Number of months or part thereof from due date to date of filing
Situations When 234A Applies
| Scenario | Is 234A Interest Charged? |
| Tax payable and return filed late | ✅ Yes |
| Tax fully paid (via advance tax/TDS), return filed late | ❌ No |
| Return not filed at all | ✅ Yes (until date of best judgment assessment) |
| Return filed on time | ❌ No |
| Refund case with no tax payable | ❌ No |
💰 Rate of Interest
- 1% per month or part of a month
- Simple interest (not compounded)
- Interest is calculated on the net tax payable
🕒 Period for Which Interest is Charged
- From the due date of filing the return (as per Section 139(1))
- To the actual date of filing the return or completion of assessment (if return not filed)
Even a delay of one day counts as a full month.
Judicial View and CBDT Clarifications
- CBDT Circular No. 2/2015 clarified that if no tax is payable (i.e., tax has been paid before due date), no interest under 234A will apply even if the return is filed late.
Courts have upheld that interest under 234A is compensatory and mandatory in nature.