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 amount of tax on total income not covered by advance tax and TDS, from the day after the ITR due date to the actual filing date. For FY 2025-26, a return filed on 15 December instead of 31 July attracts 5 months of interest. The interest is automatic, self-computed at filing, and is not deductible as a business expense.

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 tax on total income as determined under Section 143(1)" — reduced by advance tax paid and tax deducted/collected at source.

The base is the net tax outstanding, not the gross tax. This is the single most misunderstood point. The interest is computed on the tax payable that remains after crediting advance tax and TDS. A taxpayer who paid the full tax via 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), but no 234A interest, because there is no unpaid tax on which interest can run.

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)

⚠️ — confirm whether any extension has been notified for the FY 2025-26 (AY 2026-27) filing season. The dates above are the statutory due dates under Section 139(1) as amended; extensions are gazette-specific and should be checked at filing time.

Worked example: Neelam & Co. files late

Neelam & Co., a Delhi consultancy, owes ₹6,00,000 of tax on total income for FY 2025-26. It had 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 ₹22,500 s.234B line is not optional: only 58% of the ₹6,00,000 liability was covered by 31 March (₹3,00,000 of advance tax + TDS out of ₹6,00,000), short of the 90% threshold under s.234B (which applies to all assessees including companies). s.234B therefore runs at 1% per month from 1 April 2026 on the ₹2,50,000 short-fall until the tax is paid.

Note the arithmetic of the period: the return is filed on 15 December, so 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.

The interest is paid when the return is filed: the balance self-assessment tax of ₹1,50,000 plus ₹3,000 234A interest plus ₹5,000 234F fee is remitted through Challan ITNS-280 (Minor Head 300), and the return is uploaded only after the payment is reflected in Form 26AS.

What a director should actually watch

• Filing the return stops the 234A clock; paying self-assessment tax only shrinks the base. Section 234A accrues from the day after the due date until the return is furnished, on the tax outstanding at that date. Paying the balance SA tax before filing reduces the unpaid-tax base — it does not shorten the number of months. So the sequence for a delayed return is: compute liability → pay SA tax to clear the base → file the return to end the accrual period.
• 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 ~₹22,500 + 234F ₹5,000 = ~₹30,500.
• The interest is not deductible. Section 40(a)(ii) disallows sums paid on account of income tax, and interest under 234A is part of that tax — it hits post-tax profit directly.
• 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 revisions and refunds

A revised return under Section 139(5) does not reset the 234A clock. The interest is computed up to the date the original return was furnished, so a late original return followed by a revision keeps the late-filing interest. Filing the return is the event that stops the interest; revision does not reopen it.

The base can also disappear. If the tax on total income is fully covered by advance tax and TDS, there is no 234A base and no interest — but the 234F late-filing fee still applies. And if the final assessment shows a refund, the refund does not extinguish interest already computed on the period during which the tax was genuinely unpaid. For a private limited company, the operational rule is the same as for an individual: pay the balance self-assessment tax, then file — and if the filing is going to be late, make the payment early so the interest base is as small as possible.

FAQ

What is the 234A interest rate?
1% per month or part of a month, simple interest, on the tax unpaid after crediting advance tax and TDS, from the day after the due date to the filing date.

Is there 234A interest if there is no tax payable?
No. If total income is within the basic exemption limit, or if the full tax was covered by advance tax and TDS, the 234A base is nil and no interest runs — though the 234F late-filing fee may still apply.

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?
No. It is mandatory and self-computing at filing. There is no reasonable-cause waiver for 234A.

Is 234A interest deductible as a business expense?
No. Interest on income tax is treated as tax paid and is disallowed under Section 40(a)(ii).

What is the difference between 234A and 234B?
234A is interest for filing the return late. 234B is interest for advance-tax shortfall: less than 90% of assessed tax (minus TDS) by 31 March — this threshold applies to all assessees including private limited companies (s.234B(1)). Both can apply together — late filing of a late-paid tax bill attracts both.

Use the compliance calendar to track your ITR, tax audit and payment due dates: /tools/compliance-calendar. For a tax audit and ITR filing review, visit pvtltd.co.

Sources

• Section 234A, Income Tax Act 1961
• Section 234F, Income Tax Act 1961 (late-filing fee)
• Section 139(1) ITA 1961 (return due dates)
• Section 40(a)(ii) ITA 1961 (disallowance of interest on income tax)

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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

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