Interest under Section 234A for Late Filing of ITR

Introduction

Filing an income-tax return after the applicable due date can lead to several consequences. One of them is interest under Section 234A of the Income-tax Act, 1961.

Section 234A imposes simple interest when a return is furnished after the due date or is not furnished at all. The interest is calculated at 1% for every month or part of a month on the applicable unpaid tax amount.

Interest under Section 234A is separate from:

• late-filing fee under Section 234F;
• interest for default in payment of advance tax under Section 234B;
• interest for deferment of advance-tax instalments under Section 234C; and
• other consequences of filing a return after the due date.

Which law applies to AY 2026–27?

The Income-tax Act, 2025 came into force on 1 April 2026. However, returns relating to income earned before that date continue to be governed by the Income-tax Act, 1961.

Therefore, the return for FY 2025–26, corresponding to AY 2026–27, continues to be filed and processed under the Income-tax Act, 1961. Consequently, interest for late filing of the AY 2026–27 return is governed by Section 234A of the Income-tax Act, 1961, even though the return is filed after the new Act has commenced.

Section 536 of the Income-tax Act, 2025 specifically preserves proceedings, rights, obligations and liabilities relating to tax years beginning before 1 April 2026. Earlier-year proceedings continue under the repealed Act.

Latest update affecting AY 2026–27 due dates

The Finance Act, 2026 amended the due-date provisions under Section 139(1) of the Income-tax Act, 1961 for AY 2026–27.

The principal due dates currently applicable for AY 2026–27 are:

The due date for non-audit business cases and trusts was shifted to 31 August 2026, while the due date for taxpayers generally filing ITR-1 or ITR-2 remains 31 July 2026.

Section 234A interest begins only after the due date applicable to that particular taxpayer. A person whose due date is 31 August 2026 does not become liable merely because the return was not filed by 31 July 2026.

When is interest under Section 234A charged?

Interest may arise where:

1. the return is filed after the applicable due date under Section 139(1);
2. a belated return is filed under Section 139(4);
3. no return is filed and a best-judgment assessment is completed;
4. a return is filed late in response to a notice under Section 142(1);
5. an updated return is filed where no earlier return was furnished; or
6. a return required in reassessment proceedings is filed after the period allowed in the notice.

For an ordinary late-filed return, interest runs from the day immediately following the applicable due date up to the date on which the return is furnished. Where no return is furnished, it may run up to the date of completion of the relevant assessment. 

On what amount is Section 234A interest calculated?

Interest is not ordinarily calculated on the taxpayer’s gross income or total tax before credits.

The applicable tax amount is reduced by eligible credits and prepaid taxes such as:

• advance tax;
• tax deducted at source;
• tax collected at source;
• relief under Section 89;
• foreign tax relief under Sections 90, 90A and 91; and
• eligible MAT or AMT credit under Sections 115JAA and 115JD.

The Department’s current guidance describes the interest base as the tax determined under Section 143(1), or under regular assessment, after reducing the prescribed taxes, reliefs and credits. 

Self-assessment tax paid before the due date

CBDT Circular No. 2/2015 clarifies that Section 234A interest is not chargeable on the amount of self-assessment tax paid before the due date for furnishing the return.

Therefore:

• if the entire outstanding tax is paid before the due date, Section 234A interest may be nil even though the return is filed late;
• if only part of the tax is paid before the due date, interest may apply on the unpaid balance; and
• late-filing fee under Section 234F may still apply independently. 

Section 234A and late-filing fee under Section 234F are different

Section 234A is interest calculated with reference to the unpaid tax and period of delay. Section 234F is a fixed fee for delayed filing.

For AY 2026–27, the Section 234F fee is:

The fee applies where the person is required to furnish the return and the conditions of Section 234F are satisfied. It can apply even where Section 234A interest is nil because the full tax was already paid or deducted. 

What happens in the case of an updated return?

An updated return is governed by Section 139(8A) for AY 2026–27 and earlier years.

Where no earlier return was filed, Section 234A interest is calculated from the day following the original return-filing due date up to the date of furnishing the updated return. The interest is calculated on the applicable self-assessment tax payable on the income declared in the updated return. 

Where an original, revised or belated return was already filed, the Department’s current guidance states that no fresh Section 234A interest is required to be paid merely at the time of furnishing the updated return. Interest already payable in connection with the earlier return is not cancelled. Additional income-tax and other amounts relating to the updated return may still be payable. 

Filing a belated return for AY 2026–27

A belated return for AY 2026–27 may be filed up to 31 December 2026, or before completion of the assessment, whichever is earlier. Interest under Section 234A and fee under Section 234F should be calculated and paid, where applicable, before or while completing the return-filing process.

Waiting until 31 December can substantially increase the interest amount because each month or part of a month is counted separately.

Can Section 234A interest be waived?

Section 234A interest is not automatically waived merely because the taxpayer had a genuine reason for filing late.

However, CBDT may issue orders under Section 119(2)(a) permitting designated income-tax authorities to reduce or waive interest in specified classes of cases. Relief is restricted to the situations and conditions covered by the relevant CBDT orders; it is not a general discretionary remedy for every delayed return. 

A taxpayer seeking such relief should retain evidence supporting the exceptional circumstances and verify whether the case falls within an operative CBDT waiver category.

Common mistakes

Treating Section 234A as a fixed late-filing penalty

Section 234A is interest linked to unpaid tax and the period of delay. The fixed late-filing charge is governed separately by Section 234F.

Calculating interest only for completed months

Part of a month is treated as a full month. Filing on the first day of a new month can add another month of interest.

Ignoring the correct taxpayer-specific due date

Different due dates apply to non-business taxpayers, non-audit business cases, audit cases and transfer-pricing cases.

Assuming no interest is payable because tax was paid before filing

Tax paid after the statutory due date does not eliminate the earlier period of default. Interest can apply up to the relevant payment or filing date, as determined under the provision.

Assuming late filing always means Section 234A interest

Where there is no unpaid tax after permissible credits, Section 234A interest may be nil. Section 234F fee and other filing consequences can still remain.

Using Section 423 for AY 2026–27

AY 2026–27 continues under the Income-tax Act, 1961. Section 423 of the Income-tax Act, 2025 applies to returns for tax years beginning from 1 April 2026, which will generally be filed after the end of Tax Year 2026–27. 

Records taxpayers should retain

Taxpayers should retain:

• return acknowledgement;
• income-tax computation;
• advance-tax and self-assessment-tax challans;
• Form 26AS and Annual Information Statement reconciliation;
• TDS and TCS certificates;
• foreign tax credit and tax-relief documents;
• records supporting MAT or AMT credit;
• applicable audit or transfer-pricing reports; and
• evidence of tax payments made before the due date.

These records are particularly important where a self-assessment tax payment made before the due date must be excluded from the Section 234A interest calculation.

Conclusion

Section 234A imposes interest at 1% per month or part of a month when an income-tax return is furnished after the applicable due date and tax remains unpaid. The amount depends on both the duration of the delay and the net tax remaining after eligible credits and prepaid taxes.

For AY 2026–27, taxpayers must continue to apply Section 234A of the Income-tax Act, 1961. The corresponding provision for Tax Year 2026–27 onwards is Section 423 of the Income-tax Act, 2025. Although the new provision uses a clearer formula and tabular structure, the core principle of charging 1% simple interest on the relevant unpaid tax for every month or part of a month continues.

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