Section 234A Interest: 1% Per Month on Tax Unpaid When ITR Filed Late

Section 234A of the Income Tax Act 1961 charges interest at 1% per month (or part of a month) on the tax on total income that remains after advance tax, TDS/TCS, reliefs and MAT/AMT credit — from the day after the ITR due date to the actual filing date. The interest is automatic and self-computed at filing.

What the law actually requires

Section 234A, Income Tax Act 1961 — interest for default in furnishing the return of income. The rate is 1% per month or part of a month, simple interest, on "the amount of the tax on the total income as determined under sub-section (1) of section 143" (or regular assessment), "as reduced by" advance tax paid, tax deducted or collected at source, relief under ss.89/90/90A/91, and MAT/AMT credit under s.115JAA/115JD (s.234A(1)(i)–(vi)).

The base is the net tax outstanding, not the gross tax. This is the single most misunderstood point. A taxpayer whose liability was fully covered by advance tax and TDS during the year has a nil 234A base — filing late still attracts the Section 234F late-filing fee (₹5,000, or ₹1,000 if total income is up to ₹5 lakh, and only for a person required to file), but no 234A interest, because there is no unpaid tax on which interest can run.

Critically, self-assessment tax paid after the due date does not shrink the 234A base — it is not in the s.234A(1) list. Only filing the return stops the clock (s.234A(1)(a)); s.234A(2) merely reduces the interest by interest already paid under s.140A.

The period

The "part of a month counts as a full month" rule is harsh and literal. Filing one day late and filing 29 days late cost the same interest.

Due dates — FY 2025-26 (AY 2026-27)

Per Section 139(1) Explanation 2 as substituted by the Finance Act 2026 (effective 1 March 2026):

⚠️ Confirm whether any extension has been notified for the AY 2026-27 filing season. The dates above are the statutory due dates; extensions are gazette-specific and should be checked at filing time.

Worked example: Neelam & Co. files late

Illustrative example. Neelam & Co., a Delhi consultancy, owes ₹6,00,000 of tax on total income for FY 2025-26. It paid ₹3,50,000 advance tax and has ₹1,00,000 of TDS credited, leaving ₹1,50,000 outstanding. The firm's tax audit report was delayed and it files ITR on 15 December 2026 instead of 31 October 2026.

The s.234B line: 'assessed tax' means tax on total income less TDS/TCS — ₹6,00,000 − ₹1,00,000 = ₹5,00,000. Advance tax of ₹3,50,000 is 70% of that, short of the 90% threshold (s.234B(1), applying to all assessees including companies), so 234B runs at 1% per month from 1 April 2026 on the ₹1,50,000 shortfall until the tax is paid.

Note the arithmetic of the period: interest runs from 1 November (day after the due date) through the actual filing — November is a full month and December counts as a full month (part of a month = full month) → 2 months. If the firm had filed on 1 November, it would still pay 1 month of interest — one day late is one full month.

Before filing, the firm must pay the balance tax "together with interest and fee payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return", with proof of payment accompanying the return (s.140A(1)).

What a director should actually watch

• Filing the return stops the 234A clock; paying tax after the due date does not shrink the base. The s.234A(1) base excludes only advance tax, TDS/TCS, reliefs and MAT/AMT credit — post-due-date self-assessment payments are not in the list. So the sequence for a delayed return is: compute liability → pay everything due under s.140A → file the return immediately to end the accrual period. Delaying filing while the tax sits paid still accrues 1% a month.
• The clock starts the day after the due date — a single day of delay is a full month of interest. Never treat "a few days late" as cheap.
• 234A, 234B and 234F stack. Late filing of a return that already had an advance-tax shortfall attracts all three: 234A interest on the unpaid tax (return-delay), 234B on the advance-tax shortfall from 1 April, and the 234F flat fee. In this example: 234A ₹3,000 + 234B ~₹13,500 + 234F ₹5,000 = ~₹21,500.
• The interest is not deductible. Interest on income tax is treated as tax paid for disallowance purposes — confirm the current treatment with your CA, as it rests on case law beyond the statute text.
• Audit cases get two extra months, not a waiver. The 31 October / 30 November due dates extend the window but do not waive 234A once those dates pass.

How 234A interacts with later orders

The 234A base is the tax as determined — if a later order (rectification, appeal, revision) increases or reduces that tax, "the interest shall be increased or reduced accordingly", and excess interest paid is refunded (s.234A(4)). A final outcome showing advance tax and TDS covered the liability means a nil base — but the 234F fee position is separate. For a private limited company, the operational rule is the same as for an individual: pay everything due under s.140A, then file without delay.

FAQ

What is the 234A interest rate?
1% per month or part of a month, simple interest, on the tax unpaid after the s.234A(1) credits, from the day after the due date to the filing date.

Is there 234A interest if there is no tax payable?
No. If the s.234A(1) base is nil — full coverage by advance tax and TDS — no interest runs, though the 234F late-filing fee may still apply to a person required to file.

Does one day late cost one day of interest?
No. Any part of a month counts as a full month. One day late = one month of interest.

Can 234A interest be waived?
An assessee cannot claim a reasonable-cause waiver directly — but the CBDT may relax ss.234A/234B/234C/234F by general or special order (s.119(2)(a)). There is no direct waiver route.

Is 234A interest deductible as a business expense?
No — interest on income tax is treated as tax paid for disallowance purposes (confirm current case law with your CA).

What is the difference between 234A and 234B?
234A is interest for filing the return late. 234B is interest for advance-tax shortfall: advance tax below 90% of assessed tax (tax less TDS/TCS) — this threshold applies to all assessees including private limited companies (s.234B(1)). Both can apply together.

See also

• Every GST late fee in one place: GSTR-1, GSTR-3B, GSTR-9 (FY 2025-26)

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See Also

• Missed the ITR deadline? s.234F fee + s.234A interest, computed
• Every GST late fee in one place: GSTR-1, GSTR-3B, GSTR-9 (FY 2025-26)
• ROC Late Filing Fee Under Section 403: ₹100 Per Day for E-Forms AOC-4, MGT-7, DIR-3