Section 423Interest & Penaltieswas Section 234A in IT Act 1961

Interest for Late Filing of Return

Q: 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.

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 this 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

Scenario

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).

Calculation

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

Section 424Interest for Default in Advance Tax

Section 425Interest for Deferment of Advance Tax Instalment

Sections 403–408Advance Tax — Obligation and Instalments

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