Section 234F of the Income Tax Act: Penalty for Late Filing Income Tax Return

Every taxpayer in India needs to understand the provisions of income tax compliance. In other words, it will involve understanding provisions concerning timely filing of returns. The role of Section 234F of the Income Tax Act, introduced by the Finance Act, 2017, becomes extremely important in that context. The provision seeks to ensure timely filings of tax returns and make the whole exercise of tax administration more efficient. The provision is applicable from assessment year 2018-19 and provides for levying penalties on those who fail to meet the deadlines for filing.

The present article delves into the critical working of Section 234F, its objectives, implications, and compliance strategies that will help taxpayers avoid penalties.

---

Table of Content

1. What is Section 234F of the Income Tax Act?

2. Who is required to file an Income Tax Return?

3. What is the last date to file ITR?

4. What is the fine for Late Filing of ITR Under Section 234F of the Income Tax Act?

5. How to file Challan No. 280 to pay the 234F Fees?

6. Consequences of Late Filing:

7. Loss Carry Forward Restriction: 

8. How do you avoid paying the fees under section 234F to the Income Tax Department?

9. Can the late fees u/s 234F be waived?

10. Will the amendment introduced in Section 234F affect the intimation issued under Section 143(1)?

11. Can the fee paid under Section 234F be considered an allowable expense?

12. Frequently Asked Questions

---

What is Section 234F of the Income Tax Act?

Section 234F of the Income Tax Act, introduced by the Finance Act 2017, addresses the issue of late filing of income tax returns. The primary objective is to encourage timely filing and streamline the tax administration. This section applies to every person required to file income tax returns in India.

Section 234F of the Income Tax Act penalizes persons for the late filing of income tax returns (ITR). This section became applicable from the assessment year 2018-19 onwards.

Who is required to file an Income Tax Return?

Filing  an Income Tax Return (ITR) is mandatory under the following  circumstances:

1.  Exceeding Basic Exemption Limit: Filing an ITR is required if an individual's total income exceeds the basic exemption limit.

2. Age-specific Income Criteria: Individuals below 60 years must file a return when their income exceeds Rs. 2.5 lakhs. For senior citizens (60 years or more), the threshold is Rs. 3 lakhs, and for super senior citizens (80 years or more), it stands at Rs. 5 lakhs. Notably, the new tax regime, introduced in the Budget 2023, increased this limit to Rs. 3 lakhs for individuals and Rs. 5,00,000 for super senior citizens.

 Under the old tax regime, the Basic exemption limit is calculated without considering any deductions from capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB, or deductions under Section 80C to 80U. 

Important Note: Assessee Opting for the new tax regime will not be allowed to avail the above-mentioned deductions.

3.  Assets Abroad and Foreign Accounts: Residents and ordinary residents in India are obligated to file a return if they possess assets or financial interests in entities located outside India or if they have signing authority in foreign accounts.

4. Bank Deposits: Depositing Rs. 1 crore or more in one or more current accounts with a bank necessitates  filing an ITR.

5.  International Travel Expenses: Individuals spending more than Rs. 2 lakhs on international travel during the previous year are required to file a return.

6.  Substantial Power Consumption: Filing an ITR becomes mandatory for those spending more than Rs. 1 lakh on power consumption in the preceding year.

7.  Profession Gross Receipts: If the total gross receipts from a profession exceed Rs. 10 lakhs in the previous year, filing an ITR is necessary.

8.  TDS and TCS Threshold:  Individuals under 60 years must file a return if the total TDS and TCS amount during the previous year was Rs. 25,000 or more. For senior citizens, the threshold is raised to Rs. 50,000.

9.  Business Turnover Requirement: Individuals with business turnovers exceeding Rs. 60 lakhs in the preceding year are required to file a tax return.

10.  High Savings Bank Deposits: Filing an ITR is necessary if an individual's total deposit in one or more savings bank accounts during the previous year is Rs. 50 lakhs or more.

What is the last date to file ITR?

The due date for filing Income Tax Returns (ITR) in India can vary based on the type of taxpayer and the applicable audit provisions. 

Individuals, Hindu Undivided Families (HUFs), and taxpayers whose accounts are not required to be audited: The due date is typically July 31st of the assessment year. For example, for the financial year 2023-24, the due date would be July 31, 2024.

Taxpayers whose accounts are required to be audited (including companies):

The due date is October 31st of the assessment year. For example, for the financial year 2023-24, the due date would be October 31, 2024.

However, if the company has any international transaction or specified domestic transaction and is required to furnish a report in Form No. 3CEB u/s section 92E, the due date to file ITR will be 30th November of the assessment year.

What is the fine for Late Filing of ITR Under Section 234F of the Income Tax Act?

The penalty for late filing under Section 234F is as follows:

• If the return is filed after the due date but on or before December 31 of the assessment year, a penalty of Rs. 5,000 will be levied.

• If the return is filed after December 31, the penalty may be increased to Rs. 10,000 if Total Income exceeds Rs. 5 lakhs. 

• If the return is filed after the due date but on or before December 31 of the assessment year, a penalty of Rs. 1,000 will be levied if Total Income is less than Rs.5 lakhs. 

• No late filing fees are applicable if the total income does not exceed Rs. 2.5 Lakhs.

Let us understand the late ITR filing fee calculation under Section 234F with the following Cases.

How to file Challan No. 280 to pay the 234F Fees?

Challan No. 280 is the form for remitting penalties related to the non-filing or late filing of Income Tax Returns (ITR). To make a payment through Challan No. 280, the assessee must complete the following steps:

1.  Assessment Year and Tax Type:  Indicate the relevant Assessment Year and choose the applicable tax type, distinguishing between corporate tax and others.

2.  PAN (Permanent Account Number):  Enter the PAN or Permanent Account Number in the provided space on the challan.

3.  Name and Residential Address:  Provide the full name and complete residential address of the assessee.

4.  Contact Details:  State a phone number along with the STD code for communication purposes.

5.  Select Tax Type:  Choose the appropriate type of tax from the following options:

•  Advance Tax

•  Surcharge

•  Self-Assessment Tax

•  Tax on Regular Assessment

•  Tax on Distributed Profits of Domestic Companies

•  Tax on Distributed Income to Unit Holders

6.  Payment Details:  Fill in the payment details, ensuring accuracy in the entered information.

7.  Bank Information:  Specify the precise date of payment, the name of the bank, and the branch where the payment is being made.

8.  Signature:  Affix the signature of the individual making the payment.

9.  Counterfoil Details:  In the counterfoil section, provide the details as shown in the form, including PAN, name of the bank and branch, assessment year, etc.

Completing these steps accurately ensures a smooth and error-free payment process through Challan No. 280. Additionally, it is recommended to retain a copy of the counterfoil for record-keeping purposes. If there are uncertainties or questions during the process, seeking guidance from a tax professional or referring to the latest guidelines from the tax authorities is advisable.

Consequences of Late Filing:

Reduced Time for Revising Returns: The window for revising returns has been reduced to one year from the end of the financial year. Filing early allows for a longer period to rectify errors.

Payment of Interest: Late filing attracts interest at the rate of 1% per month on the unpaid tax amount. This interest accrues from the day after the due date.

Loss Carry Forward Restriction: 

Failing to file within the due date restricts the carry forward loss under the head capital gains or any loss in your business, incurred during the year, affecting future tax benefits. 

Delayed Refund Processing: Timely filing is essential to expedite the processing of refunds, ensuring that individuals receive excess taxes paid at the earliest.

How do you avoid paying the fees under section 234F to the Income Tax Department?

To avoid paying the late filing fees under Section 234F of the Income Tax Act, it is essential to file your Income Tax Return (ITR) within the prescribed due dates. Here are some key steps to avoid incurring late filing fees:

1.  File Your ITR on Time: The most straightforward way to avoid late filing fees is to file your ITR on or before the specified due date. For individual taxpayers, the due date is typically July 31 of the assessment year.

2.  Be Aware of Due Dates:  Stay informed about the due dates for filing ITR. The due date may vary based on the type of taxpayer, audit requirements, and other factors. Check for any updates or extensions from the Income Tax Department.

3.  Keep Track of Changes in Regulations: Regularly check for changes in tax regulations, including updates to late filing fees, due dates, or any other related provisions. Staying informed will help you plan and file your returns on time.

4.  Use Electronic Filing (e-filing):  Utilize the electronic filing (e-filing) option provided by the Income Tax Department. E-filing is generally faster and more convenient, reducing the likelihood of delays in submitting your ITR.

5.  Organize Your Financial Documents:  Ensure that you have all the necessary financial documents and information well in advance. Proper organization will streamline the filing process and help you submit your ITR on time.

6.  Seek Professional Assistance:  If you find the tax filing process complex or if you have a more intricate financial situation, consider seeking assistance from a tax professional. They can guide you through the process and help ensure timely filing.

7.  Make Use of Reminder Tools: Set up reminders on your calendar or use digital tools to receive notifications about upcoming tax deadlines. This will help you stay proactive and avoid unintentional delays.

8.  Consider Advance Tax Payments: If you have significant income that is not subject to tax deduction at source (TDS), consider making advance tax payments. This can help you meet your tax liabilities throughout the year and avoid a lump-sum payment at the time of filing.

9.  Plan for Contingencies: Anticipate potential challenges that could delay your filing, such as technical issues or unforeseen circumstances. Plan accordingly to submit your ITR well before the due date.

By adhering to these practices, you can minimize the risk of missing the filing deadline and, consequently, avoid the late filing fees imposed under Section 234F. It's crucial to stay informed, organized, and proactive in fulfilling your tax obligations.

Can the late fees u/s 234F be waived?

Under no circumstances the income-tax authority waive off late filing fees.

Will the amendment introduced in Section 234F affect the intimation issued under Section 143(1)?

Yes, a consequential amendment in Section 143(1) has been made in alignment with the introduction of Section 234F. As a result, the fee payable under Section 234F will now be factored into the computation of the amount payable or refund due during the processing of the return under Section 143(1).

Can the fee paid under Section 234F be considered an allowable expense?

The fee under Section 234F needs to be settled as part of the  self-assessment tax before initiating the filing of the income tax return. When an assessee pays the fee under Section 234F, it qualifies as a deductible expenditure under the relevant heads of P/G/B/P, providing an avenue for adjusting this payment within the framework of allowable deductions.

FAQ

Q1. What are the criteria for the applicability of Section 234F late filing fees, and is it applicable to all types of taxpayers?

Section 234F late filing fees are applicable if the income tax return is filed after the due date. It is applicable to all taxpayers, including individuals, HUFs, companies, and other entities.

Q2.  Can the late filing fees under Section 234F be appealed or waived in specific circumstances?

The Income Tax Act does not provide for the waiver or appeal against late filing fees under Section 234F, making it mandatory and non-negotiable.

Q3.  How is the late filing fee calculated for individuals with income exceeding 5 lakhs and those below 5 lakhs under Section 234F?

For individuals with income above 5 lakhs, the late filing fee is Rs. 5,000, and for those with income below 5 lakhs, the fee is Rs. 1,000.

Q4. If a taxpayer misses the due date and files the return late, is the late filing fee mandatory under Section 234F?

Yes, the late filing fee under Section 234F is mandatory and applies automatically if the return is filed after the due date.

Q5. Can the late filing fee under Section 234F be adjusted against any refunds due to the taxpayer?

No, the late filing fee under Section 234F cannot be adjusted against any refunds due to the taxpayer.

Q6. Is there a provision for installment payment or deferment of the late filing fee under Section 234F?

No, there is no provision for installment payment or deferment of the late filing fee under Section 234F; it is required to be paid in full.

Q7. Does the late filing fee under Section 234F attract any interest if not paid on time?

Late filing fees under Section 234F do not attract interest, but it is advisable to pay it promptly to avoid any complications.

Q8. Can the late filing fee under Section 234F be set off against other tax liabilities?

No, the late filing fee under Section 234F is a specific penalty and cannot be set off against other tax liabilities.

Q9. How does the late filing fee under Section 234F impact the carry-forward of losses for future assessment years?

The late filing fee does not impact the carry-forward of losses for future assessment years, but it is crucial to file on time to utilize this benefit.

Q10.  If a taxpayer voluntarily files a belated return after the due date, is the late filing fee under Section 234F still applicable?

Yes, even if a taxpayer voluntarily files a belated return, the late filing fee under Section 234F is applicable and must be paid.