The Central Board of Direct Taxes (CBDT) has extended the deadline for filing Income Tax Returns (ITR) for the Financial Year 2024-25 (Assessment Year 2025-26) from July 31, 2025, to September 15, 2025, for non-audit taxpayers. This provides some relief to individual taxpayers and others not subject to audit who were originally required to file their returns by the end of July. However, a crucial question arises: will taxpayers be charged interest for filing their ITR after July 31, but before the extended deadline of September 15?
Interest Implications: Section 234A
Under Section 234A of the Income Tax Act, interest is levied on unpaid tax if the ITR is filed after the due date specified in Section 139(1). The rate of interest is 1% per month or part of a month on the outstanding tax amount.
According to tax experts, because the CBDT circular explicitly extends the due date itself from July 31 to September 15, interest under Section 234A should technically not be applicable if the ITR is filed after July 31 but before September 15. This perspective is reinforced by the understanding that the revised date of September 15 will be considered the "due date" for the purposes of Section 234A. Therefore, if the due amount of tax is paid on or before September 15, 2025, no interest under this section should be levied.
However, if self-assessment tax is paid after September 15, 2025, penal interest at 1% per month will indeed be applicable.
Other Penal Interests: Sections 234B and 234C
It's important to note that the extension of the ITR filing deadline does not affect the applicability of interest under Section 234B and Section 234C. These sections pertain to defaults in payment of advance tax. Interest under these sections continues to apply if advance tax provisions are not complied with, irrespective of the ITR filing deadline extension. The penal interest rate for both Section 234B and 234C is 1% per month.
Belated Returns
If a belated ITR is filed (i.e., after the due date) and the self-assessment tax is paid after the due date, the taxpayer is liable to pay penal interest under Section 234A on the self-assessment tax due. A penalty of up to Rs.5,000 may also be charged for the delay in filing the return. However, if the total income of the person is less than Rs.5 lakh, the fee payable is Rs 1,000.
Tax Refunds and Interest
The extension of the ITR filing deadline may also have a positive impact on taxpayers eligible for income tax refunds. Taxpayers are entitled to simple interest at 0.5% per month (6% annually) on refunds due to them under Section 244A of the Income Tax Act. With the extended deadline, the interest accrual period increases. If a refund for a return filed by September 15 is processed in October, the interest component could increase by approximately 33% because interest would accrue for an additional two months compared to the usual deadline. However, interest on tax refunds is only paid if the refund amount exceeds 10% of the total tax paid for the relevant assessment year.
Key Takeaways
While the extension provides additional time for filing, taxpayers should aim to file their returns as early as possible to expedite the refund process, if applicable.
