Do you have tax payable on your total income for the Financial Year (FY) 2019-20? If yes and the amount of tax payable is more than Rs 1 lakh, watch out the interest on tax payable that is mounting with every passing month after March 2020.
Usually, tax is deducted at source (TDS) from salary and many other income and salaried people pay the tax payable, if any, at the time of filing Income Tax Return (ITR) as self assessment tax.
Moreover, in a normal year, the due date of filing ITR is July 31 of the Assessment Year (AY), so the interest on tax payable, if any, would not be much on the date of filing ITR, if the return is filed early.
But this year (AY 2020-21), due to the Covid-19 pandemic, the due date of filing return has been extended up to November 30, 2020 from July 31, 2020. As the deadline of issuing Form 16 was also extended to July 31, 2020, the return filing process for AY 2020-21 couldn’t be started before August.
However, no relief has been given on interest payable under various sections on self assessment tax over Rs 1 lakh.
“The interest payable on tax payable is 1 per cent per month from April to July u/s 234B of the Income Tax Act and it will be 2 per cent per month (1 per cent u/s 234B + 1 per cent u/s 234A) thereafter, i.e. from August to November,” said CA Karan Batra, Founder and CEO of CharteredClub.com.
So, if you have Rs 2 lakh tax payable, the interest will be Rs 2,000 per month for the first four months from April to July, 2020 or Rs 8,000. The interest will become Rs 4,000 per month from August. So, if you wait till November to file your return and deposit the self assessment tax at that time, you have to pay additional interest of Rs 16,000 for the next four months, i.e. from August to November, 2020.
So, total interest on Rs 2 lakh tax payable will become Rs 24,000 in 8 months, i.e. from April to November, 2020.
Similarly, if your tax payable is Rs 5 lakh, you will end up paying Rs 60,000 as interest in case you choose to deposit the tax at the time of filing ITR in November.
“As due date of filing ITR has been extended, people are assuming that the tax date has also been extended. But the reality is that interest is being levied on the tax payable,” said Batra.
“Interest at 2 per cent per month is barely levied, but is now getting levied; and most people don’t know about it,” he added.
So, in case you have tax payable, but don’t have all the documents to file your return, pay the tax immediately to minimise the interest payable. If you deposit some excess tax without actual calculation, you may claim it back at the time of filing your return on income.
Source : Financial Express