Delay in filing returns. I-T portal glitches raise spectre of penalty interest for taxpayers

Technical glitches on the new income tax portal may pose a new headache for taxpayers — interest liability on account of delay in filing the returns. Experts have called for an amendment to the Income Tax Act to provide relief for the assessment year 2021-22 (fiscal year 2020-21).

Though the filing deadline has been extended, tax-payers are worried. The last date for filing Income Tax Returns by salaried persons and those whose accounts need not be audited was extended to September 30 from July 31. For tax audit cases (companies mainly), the due date has been extended to November 30 from September 30.

No provision of relief

The problem is on account of the provision of Section 234 (A) of the Income Tax Act, which prescribes levying interest at the rate of 1 per cent on outstanding tax if the returns are filed after the due date. Also, Sections 234 (B) and 234 (C) levy interest in case of default or deferment in payment of advance tax. However, the law does not have a provision of relief in case of a delay in filing of returns due to technical glitches or a problem on the Tax Department’s side.

According to Shailesh Kunar, Partner with Nangia & Co LLP, taxpayers are required to pay an interest of 1 per cent per month for delay in filing ITR beyond the original due date, if the difference in the actual tax liability and the aggregate of TDS/TCS/Advance Tax exceeds ₹1 lakh. Thus, “the interest clock of the Income Tax Department continues ticking till the actual filing of the ITR, regardless the reason of the delay,” he said. This means interest will be levied from August 1 as original due date was July 31.

“Considering the hardship faced by taxpayers due to the new IT portal, which is now acknowledged by the government also, they should amend the law exempting taxpayers from interest for delay in filing ITR for AY 2021-22. A corresponding change should be introduced in the ITR e-filing utilities also, to reduce the hardships of taxpayers, who are any way struggling to comply due to the technical glitches in the new IT portal,” he said.

Fix I-T portal glitches by Sept 15: FM to Infosys

Interest part

CA Siddharth Kejriwal, Partner with ML Kejriwal & Co, said that in FY21, the net direct tax collections were about ₹9.5-lakh crore. “If we were to assume that at least 5 per cent of this tax was being paid at the time of filing of year end income tax returns, that will be around ₹50,000 crore. On this ₹50,000 crore, interest of at least 1 per cent of tax due will be charged under three different Sections of the Income Tax Act. Interest on ₹50,000 crore at 1 per cent for close to three months will be ₹1,500 crore,” he said while adding that this is a hypothetical assumption and the actual figures may vary vastly.

Further, he said that this cost, however, might be much higher in reality and compounded by the “number of precious man-hours wasted in trying to work with an extraordinarily ordinary website.”