386139 SIP myths you must know!
If an individual misses the deadline of self-assessment tax, then under Section 234 A, a penalty will be levied
On May 20, the Central Board of Direct Taxes, under Section 119 of the Income Tax Act, provided some relaxations with respect to income tax deadlines due to the impact of the second wave of the Covid-19 pandemic. The due date to submit Form 16, which was required to be furnished by June 15, 2021 may be furnished on or before July 15, 2021.
According to tax expert Sharad Kohli, filing TDS is a software-driven process and in this work-from-home scenario, accessing this software is difficult as it requires certain specifications. Therefore, this was one of the reasons to extend the deadline.
“It is obvious that salaries are also delayed and submissions will be delayed. So, it was very logical on the government’s part to extend the deadline. Of course, software issue was also one of the major reasons,” he told Money9.
However, according to the clarification provided by CBDT, taxpayers’ whose liability exceeds Rs 1 lakh shall be liable to pay the tax by July 31. The date for such individuals did not see any change.
Reasons behind CBDT move
Kohli explained two reasons behind this clarification by the CBDT. He said the first reason is this tax pertains to FY21 and lockdown in most parts of the country was imposed in the first week of April.
“So, for a period for which the income has already been earned is liable to be taxed,” he said.
The second reason is a macroeconomic one.
“The way people’s income dwindled during the lockdown, government’s revenue also got affected and taxation is one of the major sources of revenue for the government. The government also has to run its own mechanism when it comes to welfare schemes, paying government employees, etc. Hence, the government targeted the people whose total tax liability exceeds Rs 1 lakh because a person who pays this much tax can probably afford to pay the taxes and still sustain the current situation,” he said.
Penalty
If an individual misses the deadline of self-assessment tax, then under Section 234 A, a penalty will be levied on him/her.
“There is a penal interest which is around 1% per month and under Section 234 A, B and C, interest needs to be paid,” said Kohli
He further explained that the interest is calculated on a simple interest basis. For instance, an individual’s tax liability is around Rs 1,10,000 and he hasn’t paid the taxes by the end of July, then for every month of delay, he/she has to pay 1% extra, say Rs 1,100 for the first month of non-payment, Rs 2,200 for the second month and so on.
Additionally, tax paid by senior citizens will be “deemed to be the advance tax”. In layman terms, before July 31, any tax paid by senior citizens will be treated as advance tax and also no penalty will be levied if the income tax liability exceeds Rs 1 lakh. Here, senior citizens imply those above 60 years of age.