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

If a individual taxpayer’s self-assessment tax for FY 2020-21 exceeds Rs 1 lakh, the complete tax payment must be submitted by July 31 of that year. If the tax dues are not paid by this deadline, a penal interest of 1% of the tax due will be charged for each month the payment is late.

However, if such taxpayers pay the full self-assessment tax, including any outstanding tax dues, by September 30, 2021, they will avoid further penal interest.

Why these people should pay tax due now?

Section 234A of the Income-tax Act, 1961 imposes penal interest on overdue or unpaid taxes. From August 1, 2021, penal interest will be charged at a rate of 1% each month or part of a month. If you lodge your self-assessment tax return by September 30, 2021, you will only be penalised for two months. In contrast, if a person deposits their self-assessment tax return on or after October 1, 2021, they will be subject to a higher penalty interest rate, regardless of when they pay their tax liabilities.

To better understand how penal interest is computed, let’s look at an example:

Assume you owe Rs 2 lakh in self-assessment tax for FY 2020-21 as of 31.3.2021 and haven’t paid it yet. There will be a two-month penalty on payments made after September 30, 2021 if they are received after September 30, 2021. The penal interest will be Rs 4,000. However, if the payment is paid in October, the total penal interest will be Rs 6,000.In the same way, if the payment is made in November, the penal interest is Rs 8,000.

Please note that the amount of self-assessment tax liability is calculated by subtracting TDS, TCS, and any advance tax payments from the total amount of tax due for the financial year. A person’s Form 26AS contains information such as TDS, TCS, and other tax data. It’s a tax passbook that lists the TDS, advance tax, and other charges deposited against a individual’s PAN within a given financial year.

Penal interest will not be payable after a person has deposited all of his or her self-assessment tax liabilities (including any penal interest owing up to the date of payment), even if that person files an ITR later. However, the individual must file his or her ITR before the deadline in order to avoid further penalties, such as a late filing cost of up to Rs 5,000. The deadline to file a tax return for the 2020-21 financial year is now December 31, 2021. This deadline is for people whose accounts do not need to be audited.

In order to file an income tax return, an individual must first calculate his or her net taxable income, then determine whether or not he or she owes any tax (after deducting TDS, TCS, and so on), and then deposit the self-assessment tax due. Only after that can the individual file an ITR using the form that is applicable to him for the specific financial year.