Section 423 — Interest for Default in Furnishing Return | ITA 2025

Section 423 of the Income-tax Act, 2025 corresponds to s. 234 A (FA 1989 from 1-4-1989) of the Income-tax Act, 1961. STATUTORY ARCHITECTURE Interest at 1% per month (or part of month) from due date u/s 139(1) [ s. 263 of 2025] to date of…

Section 423 — - INTEREST FOR DEFAULT IN FURNISHING RETURN

Section 423 of the Income-tax Act, 2025 corresponds to s. 234A (FA 1989 from 1-4-1989) of the Income-tax Act, 1961.

Statutory text — Income-tax Act, 2025

(1) Where the return of income for any tax year is furnished after the due date or is not furnished, the assessee shall be liable to pay simple interest as per the following formula:— I= 1% × A × T where,— I = the interest payable; A = the amount of tax on which interest is payable, as specified in sub-section (2); T = number of months comprised in the period commencing on the date immediately following the starting date and ending on the end date, both specified in sub-section (2).

(2) For sub-section (1), in respect of the circumstances specified in column B of the Table below, the starting date shall be the date specified in column C, the ending date shall be the date as specified in column D and the amount of tax on which interest is payable is specified in column E:

TABLE Sl. Circumstances Starting date Ending date The amount of tax No. on which interest is payable A B C D E

1. Where the return is Due date for Date of fur- (a) Where a regu- furnished under sec- furnishing the nishing of the lar assessment tion 263(1), (4) or (6) return of income return. is not made, or in response to a under section tax on the total notice under section 263(1). income as de- 268(1) after the due termined under date. section 270(1)as reduced by tax paid;

(b) Where a regular assessment is made, tax on the total income de- termined under regular assess- ment as reduced by tax paid. Sl. Circumstances Starting date Ending date The amount of tax No. on which interest is payable A B C D E

2. Where no return has Due date for Date of com- Tax on the total income been furnished un- furnishing the pletion of the determined under reg- der section 263(1), (4) return of income assessment ular assessment as or (6) or in response under section under section reduced by tax paid. to a notice under 263(1). 271. section 268(1). 3. (a) Where return The last date of Date of fur- Amount by which the of income is time allowed un- nishing the tax on the total income required by a der such notice. return. determined on the notice under basis of such reassess- section 280 is- ment or recomputation sued after the exceeds the tax on the determination total income deter- of income under mined under section section 270(1)or 270(1)or on the basis of after the com- the earlier assessment pletion of an as- under section 270(1) or sessment under 271 or 279. section 270(10) or 271 or 279; and

(b) such return is furnished after the expiry of the time allowed un- der such notice. 4. (a) Where re-turn The last date of Date of com- Amount by which the of income is time allowed un- pletion of the tax on the total income required by a der such notice. reassessment determined on the notice under or recompu- basis of such reassess- section 280 is- tation under ment or recomputation sued after the section 279. exceeds the tax on the determination total income deter- of income under mined under section section 270(1) 270(1) or on the basis or after the of the earlier assess- completion of ment under section an assessment 270(1) or 271 or 279. under section Sl. Circumstances Starting date Ending date The amount of tax No. on which interest is payable A B C D E 270(10) or 271 or 279; and

(b) no return is fur- nished.

(3) Where as a result of an order under section 287 or 288 or 359 or 363 or 365(10) or 368 or 377 or 378, the amount of tax on which interest was payable under sub-sec- tions (1) and (2) has been increased or reduced, the interest shall be increased or reduced accordingly, and in a case—

(a) where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in such form as may be prescribed speci- fying the sum payable, and such notice of demand shall be deemed to be a notice under section 289 and the provisions of this Act shall apply accordingly;

(b) where the interest is reduced, the excess interest paid, if any, shall be refunded.

(4) For the purposes of this section,—

(a) tax on total income as determined under section 270(1)shall not include the additional income-tax, if any, payable under section 267;

(b) tax on the total income determined under regular assessment shall not include the additional income-tax payable under section 267;

(c) interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 266 towards the interest chargeable;

(d) “tax paid” means—

(i) advance tax, if any, paid;

(ii) any tax deducted or collected at source;

(iii) any relief of tax allowed under section 157;

(iv) any relief of tax allowed under section 159(1) on account of tax paid in a country outside India;

(v) any relief of tax allowed under section 159(2) on account of tax paid in a specified territory outside India referred to in that section;

(vi) any deduction, from the Indian income-tax payable, allowed under section 160, on account of tax paid in a country outside India; and 99 [(vii) any tax credit allowed to be set off as per section 206(2)(e) to (h) and 206(3) and (4).]

99. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause (vii) read as under : “(vii) any tax credit allowed to be set off as per section 206(1)(m) to (p) and 206(2)(e) to (h).”

(5) Where for any tax year, an assessment is made for the first time under section 279, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Interest for defaults in payment of advance tax.

STATUTORY ARCHITECTURE

Interest at 1% per month (or part of month) from due date u/s 139(1) [s. 263 of 2025] to date of furnishing return -- on tax payable on total income as reduced by advance tax / TDS / TCS / s. 89 relief / s. 90 / 90A / 91 relief. Compulsory; AO has no waiver discretion (Anjum M.H. Ghaswala (2002) 252 ITR 1 SC).

INTERPLAY WITH s. 425

s. 425 is for advance tax shortfall (instalment-wise). s. 423 is for late return filing. Both can apply concurrently -- s. 423 covers period from 1-Aug onwards; s. 425 covers period from 15-Jun to 31-March.

WORKED EXAMPLE

Tax payable INR 5L; advance tax + TDS = INR 2L; balance INR 3L. Return due 31-Jul; filed 30-Nov (4 months delay). Interest u/s 423 = 3L * 1% * 4 = INR 12,000.

PRACTITIONER PLANNING NOTES

Interest u/s 423 not waivable; CBDT Circular 400/234/95 -- restricted waiver for natural calamity etc.
If self-assessment tax paid before filing return, interest computed only up to that date.
Belated return u/s 139(4) [s. 263(4) of 2025]: interest accrues till actual filing.
Refund cases: even if there is refund, no interest u/s 423; but need to have paid sufficient advance tax / TDS to avoid s. 425.
Reassessment cases u/s 147/148 [s. 280 / 281 of 2025]: interest u/s 423 from due date of original return till date of compliance with s. 148 notice.

CROSS-REFERENCES

s. 423 / 424 / 425 / 426 -- interest framework.
s. 412 (default & demand).
s. 446-448 (penalty Chapter).

← All sections (537)Act 2025 hub

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
2025 provision	1961 counterpart
s. 423 -- Interest for Default in Furnishing Return	s. 234A (FA 1989 from 1-4-1989)