Click here to read about the extension of various income tax deadlines.
Dr Suresh Surana, Founder, RSM India says, “Further, though extension has been provided for the issuance of TDS certificate in Form 16 to employees post extension of due date for filing of TDS return. A similar extension is not yet provided for the issuance of TDS certificate in non-salary cases. Thus, banks are required to issue Form 16A (TDS certificate for tax deducted on interest) by June 15, 2021.”
The government press release issued on May 20, 2021, also stated that if an individual taxpayer’s tax dues, after subtracting TDS and advance tax dues, exceeds Rs 1 lakh for FY 2020-21, then the payment must be made on or before July 31, 2021. The penal interest, as per under 234A of the Income-tax Act, 1961, will be levied at the rate of 1 per cent per month from August 1, 2021, till the date of filing of ITR.
Now, even though the ITR filing deadline has been extended to September 30, 2021 for individuals whose accounts are not required to be audited, but if such an individual’s tax liability for FY 2020-21 exceeds Rs1 lakh, then they should ensure that they have paid the amount before July 31, 2021 to avoid paying penal interest.
This is similar to what the government had done last year, providing relief to small and medium taxpayers only.
Saraswathi Kasturirangan, Partner, Deloitte India says “The extension of timeline for filing the tax return is welcome. However, this does not provide relief from the interest that is chargeable for the delay in filing return beyond original due date where self-assessment tax due on the return is more than Rs 1 lakh.”
Concurring with this view, New-Delhi based practising chartered accountant Sachin Vasudeva says, “It has been clarified that interest under section 234A of the Act shall continue to be levied where the tax payable (after TDS/TCS, advance tax, relief under section 89, 90/ 90A/ 91, MAT credit) is more than Rs. 1 lakh.”
Usually, there is no specific last date for the payment of self-assessment tax. A taxpayer is required to first deposit the self-assessment tax, and then file ITR for the specific financial year. As per income tax laws, the last date to file ITR for individuals (whose accounts are not required to be audited) is July 31 (unless extended by the government), therefore, it is assumed that the last date of making payment of self-assessment tax is also July 31.
As mentioned above, if a taxpayer’s tax liability for FY 2020-21 exceeds Rs 1 lakh then they should pay it before July 31, 2021 to avoid paying penal interest – this is irrespective of whether they are a general citizen or senior citizen.
However, the government in its press release has clarified that if senior citizens (who are not required to pay advance tax as per income tax laws) pay any taxes before July 31, 2021, then the taxes paid will be treated as advance tax. Further, if due to this the final tax liability goes below Rs 1 lakh, then penal interest will not be levied under section 234A.
However, no such relief has been provided for individuals aged below 60 years. Thus, they need to pay all their tax dues exceeding Rs 1 lakh to avoid penal interest.
Kasturirangan says, “In arriving at the limit of Rs 1 Lakh, for resident senior citizens having no business or professional income, a relaxation has been provided. The self-assessment taxes paid up to 31 July may be reduced and the interest u/s 234 A will be triggered only if the taxes due exceed Rs 1 lakh after considering the taxes paid up to 31 July 2021.”
Vasudeva adds, “It has further been clarified that for the purposes of determining levy of interest under section 234A of the Act, in case of senior citizens (above 60 years of age) having no business income, self-assessment tax paid up to the original due date (i.e., without the extension provided as per the present Circular) shall be deemed as advance tax.”
How to calculate self-assessment tax?
Follow these steps to calculate the self-assessment tax due for FY 2020-21:
Step 1: Calculate your total income for FY 2020-21. This includes your salary income, capital gains, rental income, interest income, dividend income etc.
Step 2: Deduct the tax-exemptions and deductions from your total income to arrive at the net taxable income. Tax-exemptions and deductions include house rent allowance, tax-saving investments under section 80C (ELSS, PPF etc.), premium paid on your health insurance policy etc.
Step 3: Calculate the tax liability on your net taxable income.
You can use ET Wealth’s online calculator to calculate your income tax liability.
Step 4: From your total tax liability, deduct the amount of taxes that have been paid as TDS from your salary, interest income etc. Also deduct the advance tax (if any) deposited by you during the FY 2020-21. Your Form 26AS will reflect these details. However, the government has extended the due date for filing TDS/TCS return to July 31 and issuing of TDS certificates to July 15. Due to this it is likely that the TDS details for the fourth quarter will not reflect in your Form 26AS.
Once you have subtracted the TDS and advance tax amount from your total tax liability, then you will arrive at the self-assessment tax amount you will have to pay before filing your ITR.
Penal interest amount to be paid for missing deadline
Usually, penal interest under section 234A is levied if self-assessment tax is paid after the due date of filing ITR. Interest is levied at one per cent per month or part of a month on simple interest basis.
If the self-assessment tax is deposited after July 31, 2021, here’s how penal interest will be calculated: Let us say Mr X’s self-assessment tax due for FY 2020-21 is Rs 1.5 lakh. He makes the payment on September 10, 2021. As his self-assessment tax liability exceeds Rs 1 lakh, he will be liable to pay penal interest. The interest will be calculated from August 1 to September 10, 2021, i.e., one months and 10 days. However, even though he paid the tax due on September 10, i.e., on the tenth day of the month, he will have to pay penal interest for two months. This is because 10 days of September are considered part of second month. Due to this, Mr X will have to pay a penal interest amount of Rs 3,000.
