How to reduce penal interest payable on tax if ITR filing delayed due to glitches in site

If an individual taxpayer’s self-assessment tax amount exceeds Rs 1 lakh for FY 2020-21, then the full tax payment had to be made on or before July 31, 2021. If the tax dues have not been paid by this due date, then he/she will have to pay a penal interest of 1 per cent of tax due for every month of delay. Click here to read the full story.

However, such taxpayers can avoid further penal interest if they pay the full self-assessment tax i.e., any remaining tax dues now, i.e., by September 30, 2021.

Why these people should pay tax due now

Penal interest on tax still due/payable is levied under section 234A of the Income-tax Act, 1961. Penal interest is levied at 1 per cent per month or part thereof starting from August 1, 2021. If the self-assessment tax is deposited on or before September 30, 2021, then it will attract penal of two months only. However, if the self-assessment is deposited on or after October 1, 2021, then the individual will pay more penal interest depending on date the tax dues payment is made.

Here is an example to understand how penal interest will be calculated:
Suppose, the self-assessment tax due and unpaid for FY 2020-21 is Rs 2 lakh as on 31.3.2021 and has not been paid till now. If the payment is made on or before September 30, 2021, then the penal interest will be calculated for two months. The penal interest will be Rs 4,000. However, if the payment is made in the month of October, then total penal interest will be Rs 6,000. Similarly, if the payment is made in the month  of November, then penal interest will be Rs 8,000.

Do keep in mind that self-assessment tax dues are calculated after subtracting TDS, TCS and advance tax paid from total tax payable for a financial year. The TDS, TCS etc can be checked from an individual’s Form 26AS. It is a tax passbook which contains details of the TDS, advance tax and other dues that have been deposited against the individual’s PAN for a particular financial year.

Once the self-assessment tax dues (along with any penal interest due till date of payment) have been deposited by an individual, penal interest will not be payable beyond the month in which the full tax is paid even if the individual files ITR later. However, the individual should file ITR before the last date for doing so to avoid other types of penalties such as a late filing fee of up to Rs 5,000 etc. The last date of filing income tax return for FY 2020-21 is currently December 31, 2021. This deadline is applicable for individuals whose accounts are not required to be audited.

The process of income tax return filing requires an individual to first compute his/her net taxable income, then compute if he/she has any tax due to pay (after subtracting TDS, TCS etc), then deposit the self-assessment tax. Only after this can the person file ITR using the form applicable to him for the specific financial year.

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