TaxSaral

Section 423 · was Section 234A in the 1961 Act

Interest for Late Filing of Return

If you file your ITR after the due date (typically July 31), simple interest at 1% per month is charged on the unpaid tax amount, from the due date to the actual date of filing.

Who it applies to: Anyone who files their Income Tax Return after the due date with tax still outstanding.

Key points

  • Interest is on unpaid tax — if all tax was paid via TDS and advance tax, Section 423 interest is zero even if you file late.
  • 1% per month (or part of a month) — even one day late in August counts as a full month.
  • Filing after December 31 also attracts a late filing fee under Section 234F: ₹5,000 (₹1,000 if income < ₹5L).
  • Late filing also forfeits the right to carry forward certain losses (except house property losses).

Worked example

ITR filed in October with outstanding tax

Mohit has a tax liability of ₹80,000 for TY 2026-27. He paid ₹60,000 via TDS and advance tax but forgot to pay the remaining ₹20,000. He files his ITR on October 20, 2027 (due date was July 31, 2027).

Unpaid tax: ₹20,000
Due date: July 31, 2027
Actual filing: October 20, 2027

Months of delay: August (1), September (1), October (1 — partial month counts) = 3 months

Section 423 interest: ₹20,000 × 1% × 3 = ₹600

Section 234F late filing fee: ₹5,000 (income > ₹5L)

Total additional payment: ₹20,000 + ₹600 + ₹5,000 = ₹25,600

Result: Mohit pays ₹600 in Section 423 interest and ₹5,000 in late filing fee. The late filing fee applies regardless of the unpaid tax amount — filing by July 31 is always advisable.

Related sections

Not sure how Section 423 applies to you? Ask a question or browse all sections.

Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.