Section 234F of Income Tax Act

Section 234F of the Income Tax Act mandates that a taxpayer must pay a monetary penalty if there has been a delay in filing the Income Tax Return beyond the due date set by the Income Tax Department. The Indian government and the Income Tax Department require every taxpayer to file an Income Tax Return to ensure that the income earned in a financial year is accounted for and applicable taxes are deposited with the concerned authorities. Filing ITR also helps the Indian government increase its tax revenue and use the proceeds for various developmental activities. However, some taxpayers fail to file their ITRs within the stipulated time, and the Income Tax Department penalises them for their failure to file ITRs.

Section 234F of the Income Tax Act provides guidelines for levying a monetary penalty on taxpayers who have failed to file their ITRs before the due date. As a taxpayer, it is important to know the provisions of section 234F to avoid late ITR penalties and ensure effective taxation compliance.

What is Section 234F of the Income Tax Act?

Section 234F is a section included in the Income Tax Act 1961 that deals with levying monetary penalties on taxpayers who fail to file their Income Tax Returns before the due date. The Indian government and the Income Tax Department set a due date every year for taxpayers to file their Income Tax Returns. The date is generally 31st July, but the Income Tax Department may extend the deadline in some cases. Under section 234F of the Income Tax Act, every taxpayer is liable to pay a penalty of up to Rs. 5,000 if they have not filed their ITR by 31st December of the assessment year. However, this penalty may be extended depending on the delay in filing the ITR.

Late fee penalty

Under section 234F of the Income Tax Act, taxpayers must deposit a penalty to the Income Tax Department in case of failure to file a timely ITR. Here are the late fee penalties under section 234F of the Income Tax Act:

• If a taxpayer's total income is above Rs. 5 lakh they are liable to pay a penalty of Rs. 5,000 if they file their ITR after the due date but before 31 December of the same assessment year.

• If a taxpayer's total income is below Rs. 5 lakh, they are liable to pay a reduced penalty of Rs. 1,000 if they file their ITR after the due date.

• Taxpayers who file their ITR after 31 December are liable to pay an increased penalty of Rs. 10,000. This is subject to the taxpayer's total income being higher than Rs. 5 lakh.

• No penalty is required to be paid by taxpayers for late filing of ITR if their total income is lower than Rs. 2.5 lakh.

Scope of section 234F

The Indian government and the Income Tax Department mandate that all taxpayers must file their ITRs before the due date. In case of failure, they are liable to pay a penalty of at least Rs. 1,000, depending on their total income. The penalty can be increased to Rs. 10,000 for further delays under section 234F of the Income Tax Act. Below are the taxpayers and entities that are eligible for paying the penalty under section 234F in case of late filing of ITR:

• Individuals

• Firms

• Companies

• Association of Persons (AOPs)

Penalty before section 234F

Filing of ITR is compulsory under the various sections of the Income Tax Act 1961, as the Indian government wants to ensure that the money earned is taxed and is not used for illicit purposes. Prior to the introduction of section 234F in the Income Tax Act 1961, taxpayers who failed to file their ITRs before the due date were penalised at a flat rate under the provisions of section 271F of the Income Tax Act. Under this section, the penalty was the highest of Rs. 5,000.

However, the Indian government removed section 271F and introduced a new section named section 234F in the Income Tax Act in 2018-19. Now, under the provisions of section 234F, taxpayers are liable to pay several penalties. If the return is filed after the due date but before December 31 of the assessment year, the penalty is Rs. 5,000. If the return is filed after December 31, the penalty increases to Rs. 10,000. However, for taxpayers with a total income of up to Rs. 5 lakh, the penalty is capped at Rs. 1,000, regardless of when the return is filed after the due date.

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Mandatory requirement for ITR filing

Taxpayers are liable to file their Income Tax Returns in the following cases:

Income exceeding the basic exemption limit

If your income is higher than the basic exemption limit, you must file an ITR. The basic exemption limit under the old tax regime is Rs. 2.5 lakh and Rs. 3 lakh in the new regime.

• Age-specific criteria: You need to file an ITR if your income is above Rs. 2.5 lakh, and you are below 60 years of age. The basic exemption limit for senior citizens (over 60 years of age) is Rs. 3 lakh, and for super senior citizens (over 80 years of age), it is Rs. 5 lakh. The limits for individuals aged above 60 and 80 were increased in the Union Budget 2023.

• Under the old tax regime, the basic exemption limit is calculated without considering deductions from capital gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, or 54GB or deductions under sections 80C to 80U. Furthermore, individuals opting for the new tax regime introduced in Budget 2020 are not allowed to avail themselves of the above-mentioned deductions and certain other exemptions. The new tax regime offers lower tax rates but disallows most deductions and exemptions that are available under the old tax regime.

• Assets abroad and foreign accounts: If you possess any asset or financial interest outside India or if they have signing authority in foreign accounts, you must file an ITR.

• Bank deposits: If you have a bank deposit in your current account equal to or higher than Rs. 1 core, you must file an ITR.

• International travel expenses: If you have spent more than Rs. 2 lakh on your international travel during the previous year, you are required to file an ITR.

• Power consumption: If you have spent more than Rs. 1 lakh on power consumption in the previous year, it is mandatory to file an ITR.

• Professional gross receipts: You must file an ITR if you are a professional and your gross receipts from your profession have exceeded Rs. 10 lakh in the previous year.

• TDS and TCS threshold: If you are below the age of 60 and your TDS and TCS amount was Rs. 25,000 or more during the previous year. The TDS and TCS threshold is 50,000 for senior citizens above the age of 60.

• Business turnover: If your business has exceeded an annual turnover of Rs. 60 lakh in the previous year, you are liable to file an ITR.

• High savings bank deposits: If your total deposits in one or multiple savings bank accounts have exceeded Rs. 50 lakh, you are required to file an ITR.

If you fail to file an ITR before the due date, you will be liable for a penalty of a minimum of Rs. 1,000 and a maximum of Rs. 10,000 under section 234F of the Income Tax Act.

Section 234F of the Income Tax Applicability

Section 234F of the Income Tax Act is applicable if a taxpayer has failed to file the ITR before the due date set by the Income Tax Department. The penalty is a minimum of Rs. 1,000 and a maximum of Rs. 10,000 based on the total income and the number of days of delay in filing the ITR. If you have failed to file an ITR before the due date, you must pay the penalty using Challan No. 280. You must complete the following steps to pay the penalty using Challan No. 280 under section 234F of the Income Tax Act:

• Assessment year: Indicate the applicable assessment year.

• PAN: Enter the Permanent Account Number (PAN) in the space where the PAN number is required.

• Name and address: Provide your full name and residential address in the relevant sections.

• Contact details: Enter your phone number for further communication purposes.

• Tax type: Select the relevant tax type from the following types:

• Advance tax

• Surcharge

• Tax on regular assessment

• Self-assessment tax

• Tax on distributed profits of domestic companies

• Tax on distributed income to unit holders

• Payment details: Fill in your payment details and choose the mode of payment.

• Bank information: Enter the date of payment and the bank and branch name where you are making the payment.

• Signature: Attach your signature at the time of making the payment.

• Counterfoil details: Enter the details as per the form in the counterfoil section, including assessment year, PAN, bank and branch name, etc.

What is the fine for late filing of ITR under section 234F of the Income Tax Act?

Here are the penalties levied on taxpayers in case they fail to file their ITR before the due date under section 234F of the Income Tax Act:

• Rs. 5,000 if the return is filed after the due date but before December 31 of the assessment year.

• Rs. 10,000 if the return is filed after December 31 of the assessment year.

• Rs. 1,000 for taxpayers with a total income of up to Rs. 5 lakh, regardless of when the return is filed after the due date.

Conclusion

The Indian government and the Income Tax Department press heavily on the process of filing ITRs. They mandate that every earning individual or entity must file an ITR before the due date, which is generally the 31st of July of every year. However, if taxpayers fail to file their ITRs before the due date, the prisons of section 234F of the Income Tax Act start to apply. The provisions mandate that the taxpayer must pay a penalty of a minimum amount of Rs. 1,000 and a maximum amount of Rs. 10,000, depending on the delayed time and the total income. Hence, it is vital that you ensure timely filing of your ITR to avoid penalties under section 234F of the Income Tax Act 1961.

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