Income Tax Act

Official PDF pages 526–530

SOURCE PDF PAGE 526
(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.
424.   (1) Subject to the other provisions of this section, where, in any tax year, an
assessee who is liable to pay advance tax under section 404,—
( a )   has failed to pay such tax; or
( b )   the advance tax paid by such assessee under the provisions of section
406 or 407 is less than 90% of the assessed tax,
the assessee shall be liable to pay simple interest at the rate of 1% for every month
or part of a month, for the period, beginning from the 1st April following such tax
year—
( i )   upto the date of determination of total income under section 270(1); and
( ii )   upto the date of completion of regular assessment, where a regular
assessment is made,
on an amount equal to the assessed tax in case where clause ( a ) is applicable or, on
the amount by which the advance tax paid as aforesaid falls short of the assessed
tax in case where clause ( b ) is applicable.
(2)   In sub-section (1), “assessed tax”means the tax on the total income determined
under section 270(1) and where a regular assessment is made, the tax on the total
income determined under such regular assessment as reduced by the amount of,—
( a )   any tax deducted or collected at source as per Chapter XIX-B on any
income which is subject to such deduction or collection and which is
taken into account in computing such total income;
( b )   any relief of tax allowed under section 157;
( c )   any relief of tax allowed under section 159(1) on account of tax paid in
a country outside India;
( d )   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;
( e )   any deduction, from the Indian income-tax payable, allowed under section
160, on account of tax paid in a country outside India; and
1
[ ( f )   any tax credit allowed to be set off as per section 206(2)( e ) to ( h ) and 206(3)
and (4). ]
(3)   For the purposes of this section,—
( a )   where in relation to a tax year, an assessment is made for the first time
under section 279, the assessment so made shall be regarded as a regular
assessment;
1.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, clause ( f ) read
as under :
“( f )   any tax credit allowed to be set off as per section 206(1)( m ) to ( p )   and 206(2)( e ) to
( h ).”

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SOURCE PDF PAGE 527
( b )   tax on total income as determined under section 270(1) shall not include
the additional income-tax, if any, payable under section 267;
( c )   tax on the total income determined under such regular assessment shall
not include the additional income-tax payable under section 267.
(4)   Where, before the date of determination of total income under section 270(1)
or completion of a regular assessment, tax is paid by the assessee under section
266 or otherwise,—
( a )   interest shall be calculated as per the foregoing provisions of this section
up to the date on which the tax is so paid, and reduced by the interest, if
any, paid under section 266 towards the interest chargeable under this
section;
( b )   thereafter, interest shall be calculated at the rate aforesaid on the amount
by which the tax so paid together with the advance tax paid falls short
of the assessed tax.
(5)   Where as a result of an order of reassessment or recomputation under section
279, the amount on which interest was payable in respect of shortfall in payment
of advance tax for any tax year under sub-section (1) is increased, the assessee shall
be liable to pay simple interest at the rate of 1% for every month or part of a month
comprised in the period commencing on the 1st April immediately following such
tax year and ending on the date of the reassessment or recomputation on such
amount determined as per formula below:—
A = B – C
where,—
A =   the increased amount on which interest was payable in respect of
shortfall in payment of advance tax for any tax year as a result of
reassessment or recomputation;
B =   tax on total income determined on the basis of reassessment or recom -
putation;
C =   tax on total income determined under section 270(1) or regular assess -
ment as referred to in sub-section (1).
(6)   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 on which interest was payable under sub-section
(1) or (3) has been increased or reduced, the interest shall be increased or reduced
accordingly, and—
( a )   in a case where the interest is increased, the Assessing Officer shall serve
on the assessee a notice of demand in such form as may be prescribed
specifying 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 )   in a case where the interest is reduced, the excess interest paid, if any,
shall be refunded.
Interest for deferment of advance tax.
425.   (1) Where in any tax year, an assessee, liable to pay advance tax under
section 404, other than the assessee mentioned in sub-section (3), has failed

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SOURCE PDF PAGE 528
to pay such tax, or the advance tax paid by the assessee on its current income on or
before the date specified in column B of the Table below, is less than advance tax
due on returned income, as specified in column C, then the assessee shall be liable
to pay interest on the amount of shortfall of advance tax as specified in column D,
at the rate of interest specified in column E:—
TABLE
Sl.
No.
Due date of
Instalment
Advance tax due on
returned income
Amount of Shortfall
of advance tax being
advance tax due as per
column C, as reduced
by advance tax already
paid on or before the date
specified in column B
Interest
payable on
shortfall as
specified in
column D
A   B   C   D   E
1.   15th day of
June
15% of the tax due on
returned income.
Shortfall till 15th
day of June
3%
2.   15th day of
September.
45% of the tax due on
returned income.
Shortfall till 15th
day of September
3%
3.   15th day of
December.
75% of the tax due on
returned income.
Shortfall till 15th
day of December
3%
4.   15th day of
March.
100% of the tax due
on returned income.
Shortfall till 15th
day of March
1%.
(2) The assessee shall not be liable to pay any interest under sub-section (1), if the
advance tax paid by the assessee on the current income,—
( a )   on or before the 15th day of June is 12% or more of the tax due on the
returned income;
( b )   on or before the 15th day of September is 36% or more of the tax due
on the returned income.
(3) An assessee who declares profits and gains as per section 58(2) (Table: Sl. No. 1
or 3) or, who is liable to pay advance tax under section 404, has failed to pay such
tax, or the advance tax paid by the assessee on its current income on or before the
15th day of March is less than the tax due on returned income, shall be liable to
pay simple interest at the rate of 1% on the amount of shortfall from the tax due
on returned income.
(4) No interest shall be payable under sub-section (1) or (3) in respect of shortfall
in the payment of tax due on returned income, where,—
( a )   the shortfall is on account of under estimation of, or failure to estimate
the following income:—
( i )   capital gains;
( ii )   income as per section 2( 49 )( n ) ;
( iii )   income under the head profits and gains of business or profession
accruing or arising for the first time;
( iv )   dividend income; and

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SOURCE PDF PAGE 529
( b )   the assessee has paid in full, the tax payable on the said income had such
income been part of total income, in any of the remaining instalments
of advance tax, if any, or by the 31st day of March of the tax year.
(5) For the purposes of this section “tax due on the returned income” means the tax
chargeable on the total income declared in the return of income furnished by the
assessee for the tax year in which the advance tax is paid or payable, as reduced
by the amount of—
( a )   any tax deducted or collected at source as per the provisions of Chapter
XIX-B on any income which is subject to such deduction or collection
and which is taken into account in computing such total income;
( b )   any relief of tax allowed under section 157;
( c )   any relief of tax allowed under section 159(1) on account of tax paid in
a country outside India;
( d )   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;
( e )   any deduction, from the Indian income-tax payable, allowed under section
160, on account of tax paid in a country outside India; and
2
[ ( f )   any tax credit allowed to be set off as per section 206(2)( e ) to ( h )   and 206(3)
and (4). ]
(6) For the purposes of this sub-section, the expression “dividend” shall have the
meaning assigned to it in section 2( 40 ), but shall not include sub-clause ( e ) thereof.
Interest on excess refund.
426.   (1)   Subject   to   the   other   provisions   of   this Act, where any refund is
granted to the assessee under section 270(1), and—
( a )   no refund is due on regular assessment; or
( b )   the   amount   refunded   under   section   270(1)   exceeds   the   amount
refundable on regular assessment,
the assessee shall be liable to pay simple interest at the rate of 0.5% on the whole
or the excess amount so refunded, for every month or part of a month comprised in
the period from the date of grant of refund to the date of such regular assessment.
(2) 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 refund granted under section 270(1) is held to
be correctly allowed, either in whole or in part, then, the interest chargeable, if any,
under sub-section (1) shall be reduced accordingly.
(3) Where in relation to a 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.
2.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, clause ( f ) read
as under :
“( f )   any tax credit allowed to be set off as per section 206(1)( m ) to ( p )   and 206(2)( e ) to
( h ) .”

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SOURCE PDF PAGE 530
F.—Levy of fee in certain cases
3
[Fee for default in furnishing statements.
427.   (1) Without prejudice to the provisions of this Act, where any person fails
to deliver or cause to be delivered a statement as per section 397(3)( b )   within
the time prescribed therein, he shall be liable to pay by way of fee, a sum of   `   200 for
every day for which such failure continues.
(2) The amount of fee referred to in sub-section (1) shall—
( a )   not exceed the amount of tax deductible or collectible; and
( b )   be paid before delivering or causing to be delivered the statement, as per
sub-section (1).
(3) Without prejudice to the provisions of this Act, where any person who is required
to furnish a statement of financial transaction or reportable account under section
508(1), fails to furnish such statement within the time prescribed under section 508(2),
he shall be liable to pay by way of fee, a sum of   `   200 for every day for which such
failure continues and such fee shall not exceed a sum of   `   1,00,000.
Fee for default in furnishing return of income, audited accounts and reports.
428.   Without prejudice to the provisions of this Act, where any person—
( a )   required to furnish a return of income under section 263, fails to do so
within the due date, as specified under sub-section (1) of the said section,
he shall be liable to pay by way of fee,—
( i )   a sum of   `   1000, if the total income of such person does not exceed
`   500000; and
( ii )   a sum of   `   5000, in any other case;
( b )   furnishes a return of income under section 263(5)   beyond nine months
from the end of relevant tax year, he shall be liable to pay by way of fee,––
( i )   a sum of   `   1000, if the total income of such person does not exceed
`   500000; and
( ii )   a sum of   `   5000, in any other case;
3.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to their substitution, sections
427 and 428 read as under :
“427.   Fee for default in furnishing statements.— (1) Without prejudice to the provisions of
this Act, where a person fails to deliver or cause to be delivered a statement within the time
prescribed in section 397(3)( b ) ,   he shall be liable to pay, by way of fee, a sum of   `   200 for
every day during which the failure continues.
(2) The amount of fee referred to in sub-section (1) shall,—
( a )   not exceed the amount of tax deductible or collectible; and
( b )   be paid before delivering or causing to be delivered the statement, as per sub-section
(1).
428.   Fee for default in furnishing return of income.— Without prejudice to the provisions of
this Act, where, a person required to furnish a return of income under section 263 fails to do
so within such time as may be prescribed in section 263(1), he shall pay, by way of a fee,—
( a )   a sum not exceeding   `   1000, if the total income of such person does not exceed
`   500000;
( b )   a sum of   `   5000, in any other case.”