Section 234A of the Income Tax Act, 1961 provides for the payment of interest on the amount of tax that is not paid by the due date. This interest is commonly referred to as “Interest under Section 234A”.
The purpose of this provision is to encourage taxpayers to pay their taxes on time and to compensate the government for the loss of time value of money that arises due to late payment of taxes.
The rate of interest under Section 234A is 1% per month or part thereof, from the due date of filing the return of income until the date of actual filing of the return of income. However, the interest rate cannot exceed the amount of tax payable on the total income for the relevant assessment year.
It is important to note that interest under Section 234A is calculated on the amount of tax that remains unpaid after the due date for filing the return of income. Therefore, if a taxpayer has paid the entire tax liability on or before the due date for filing the return, there will be no liability to pay interest under Section 234A.
