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Section 234F - Finserv MARKETS

What is Section 234F of the Income Tax Act?

Regular post-retirement income | Additional tax benefit on investments up to ₹50,000 u/s 80CCD (1B) - EEE Category | Regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India)

Filing income tax returns is one of the most crucial responsibilities of every earning citizen of this country. Taxes essentially contribute directly to the growth and development of the economy and the country at large. This determines the opportunities the people receive in order to live a better and more secure life, right from factors as basic as adequate healthcare to employment and infrastructure. 

 

Just as important is the payment of taxes and responsibly furnishing its subsequent filings. Missing the deadlines surrounding these duties comes with its rightful consequences which usually come in the form of penalties. A section of the Income Tax Act called Section 234F is made specifically to address these consequences to tax-payers, helping you understand the repercussions you are liable to in case you fail to file your Income Tax Returns on time. 

Overview

Section 234F of the Income Tax Act of 1961 was introduced in 2017. This section states explicitly the kind of penalties that a tax-paying citizen must pay in order to rectify their situation in case of tardiness to Income Tax Return filing. Section 234F simply states that which can follow if the duties on a tax-paying citizen as stated in Section 139 (1) aren’t abided by in time. The penalty under Section 234F is decided as per the date of filing your income tax return and your gross annual income.

Mandatory Income Tax Return Filing

It is understood that a working citizen in India who brings home a certain amount of money in exchange for that work as an income is levied with a tax liability. Hence, it is also crucial to know who is required to file these tax returns and when one needs to file an ITR. 

  • Total Annual Income Limit

All earning individuals harbour the right to be exempt from taxes until a maximum income limit. This limit is an annual income of ₹2,50,000. This limit is stated only for those under the age of 60 years, those who do not identify as senior citizens. For senior citizens, the maximum limit of exemption is ₹3 Lakhs. In case of super senior citizens, which is the population that is above the age of 80 years hone a maximum exemption limit of ₹5 Lakhs. 

  • Assets Abroad

All tax-paying citizens of this country who are beneficiaries of assets they own in regions that are outside the political boundaries of India are liable to paying taxes in order to own those assets or in case they earn an alternate income through those assets. This includes financial interests in companies abroad, the authority held by the individual in an account, etc. 

  • Bank Current Account Deposits

You are required to file income tax returns if you have deposited more than ₹1 Crore in one or more current bank accounts in the previous financial year. However, in case of a current account at the post office, you may not be required to file an ITR since no specific mention of post office current accounts has been made in the sections of the Income Tax Act when it comes to the context of income tax returns.  

  • International Travel Expenditure

If you are to make a trip abroad, and the expenditure on your behalf exceeds the limit of ₹2 Lakhs, you are liable to file an ITR. This also applied to instances where you might be sponsoring a trip for another individual. 

  • Annual Electricity Bill Limit

In the previous financial year, should your electricity bill for power consumption exceed ₹1 Lakh, you are obliged to file your Income Tax Returns. This is usually the case of companies, offices, organisations, institutions, trusts, etc.   

  • Total Gross Professional Receipts

As a tax-paying individual, according to Section 44AA, Section 44AB, and Section 44ADA, you are required to file income tax returns if the gross total of your professional receipts exceeds ₹10 Lakhs. 

  • TDS and TCS Limit

TDS and TCS stand for Tax Deducted at Source and Tax Collected at source, respectively. If your TDS and TCS deductions and collections have exceeded ₹25,000 during the previous financial year, you are liable to file income tax returns. If the tax-payer is above the threshold of 60 years of age, the TDS and TCS limit in case of ITR filing is ₹50,000. 

  • Business Turnover

If you are a business owner and the yearly turnover of your business exceeds ₹60 Lakhs, an income tax return filing is a must for you. This includes total sales, gross receipts and turnovers, and is calculated on an annual basis. 

  • Bank Savings Deposits

With a similar context as the bank deposit limit, a maximum capping is applied to deposits made to savings accounts as well. If your deposits in one or more savings accounts exceeds the limit of ₹50 Lakhs, an ITR filing is a prerequisite.

Important Dates Pertaining to ITR Filing

Giving below are the crucial dates you must commit to when it comes to filing your income tax returns. 

Categories

Dates

Individuals/companies who are required to be audited

31st July

Individuals who do not require auditing

30th September

Individuals who are required to provide a report as per Section 92E

30th November

Eligibility Criteria of Section 234F

Most earning parties are eligible for the provisions under Section 234F of the Income Tax Act of 1961. However, individuals who earn less than ₹2,50,000 on an annual basis, companies or business who have an annual turnover less than ₹60 Lakhs, professionals with a gross receipt under ₹10 Lakhs and others do not qualify for ITR filing or the provisions under Section 234F. 

 

A general eligibility is stated below for your understanding. 

 

  • Individuals

  • Hindu Undivided Families

  • Companies

  • Firms

  • Trusts

  • Association of Persons (AOP)

  • Body of Individuals (BOI)

  • Other tax-paying entities/people

Penalty under Section 234F

As per Section 234F of the Income Tax Act of 1961, the penalty to be paid for shirking ITR deadlines is essentially classified as a late fee. The Section 234F late fee is automatically applied after transgression of the due date assigned as per the schedule released and updated by the Income Tax Department every year. You can find this schedule on the new Income Tax Returns portal to plan in advance in order to avoid the late fee under Section 234F in any case. 

 

Late Fee Calculation as per Section 234F of the Income Tax Act

 

It is to be duly noted that the late fee is calculated on the basis of an individual’s/tax-paying entity’s overall annual income, keeping in mind the category they are included in as taxpayers. A breakdown of this is as follows. 

 

  • If your yearly income is ₹5 Lakhs, the late fee would be ₹5,000.

  • If your annual income is less than (or equal to) ₹5 Lakhs, then your late fee is calculated as ₹1000.

  • If your total annual income does not cross ₹2.5 Lakhs, you are not required to pay any income tax or a late fee for that matter.  

How to Pay Late Fee as per Section 234F of the Income Tax Act

The only way to resurrect your late income tax return filing is to pay the due fee and to ensure that any such tardy actions are avoided in the future. In order to fill your late fee, you can follow the steps below. 

 

  • Step 1 : Start by visiting the NSDL page. 

  • Step 2 : Select Challan ITNS 280.

  • Step 3 : Choose either of the following: to report the Section 234F penalty as part of total income tax dues or state the penalty amount as ‘other’.

Exceptions under Section 234F of the Income Tax Act

Certain individuals are exempt from paying penalties under Section 234F of the Income Tax Act of 1961. Their criteria is stated as follows.

 

  • Individuals who don’t identify as senior citizens, that is those who are under the age of 60 years, and have a yearly income of less than ₹2.5 Lakhs. 

  • Senior citizens (those above the age of 80 years) who have an annual income of ₹3 Lakhs or less. 

  • Those above 80 years of age (super senior citizens) who earn an annual income of less than ₹5 Lakhs.

Other Repercussions for Late ITR Filing

Depending on your case, a late fee is not the only consequence you are entitled to. Other consequences can also follow and you can find an explanation of a few below. 

  • Adjustments for Previous Losses

Delayed filing of your income tax returns levies a heavy burden on your chance of claiming exemption for previous long-term and short-term capital losses, regardless of whether these losses are non-speculative or speculative. 

  • Refund Delays

Should you accidentally make a calculation error that leads to excess tax payment or inadequate tax exemption due to various reasons, you are entitled to a tax refund. However, a delay in filing your ITR might rob you of the chance to receive full refund or any refund at all. 

  • Loan and Card Acquisition

Your eligibility to acquire a loan or a credit card depends heavily on your financial history, and a large part of your financial history is based on your taxation record. Hence, a financial record soiled by undisciplined income tax return filing can heavily impact your chance of getting a loan, credit card or any such financial assistance. 

FAQs

  • ✔️How much is the late fee under Section 234F of the Income Tax Act?

    Depending on the category of individuals/non-human entities that you as a tax-payer identify as, you can be levied with a late fee ranging from ₹1,000 to ₹5,000.

  • ✔️Will I have financial trouble if I don’t file my ITR?

    When it comes to repercussions, a late fee could be the least you can be levied with. You could be on the receiving end of refund delays, dismissal of loss adjustments, problems with qualifying for loans, etc.

  • ✔️As per Section 234F of the Income Tax Act, I am required to pay a penalty on late filing if I have an income of ₹2.5 Lakhs?

    If your annual income is under ₹2.5 Lakhs, you are not required to pay income tax or any subsequent penalties or fees.

  • ✔️Do trusts qualify for the provisions as stated under Section 234F of the Income Tax Act?

    Yes, trusts are included under the tax-paying entities eligible for Section 234F. 

  • ✔️Does HUF get any exemptions on tax penalties?

    Penalties and late fees are applied to all backgrounds and categories listed under the sections of the Income Tax Act. Hence, individuals, trusts, corporations, Hindu Undivided Families, etc. are levied with late fees according to their annual gross income.