Chapter 15: Return of Income, Advance Tax, and

Interest
(Updated for AY 2024 - 25 and AY 2025 - 26, incorporating amendments up to the
Finance (No. 2) Act, 2024)

Introduction
This chapter details the procedural obligations of taxpayers under the Income Tax Act, 1961.
It covers the requirements for filing a Return of Income (RoI), the mechanism for paying taxes
during the financial year (Advance Tax), and the consequences (Inter est and Fees) for delays
or defaults.

PART A: Return of Income (RoI) - Section 139 and Related Provisions

A Return of Income is the prescribed format through which an assessee declares their total
income and tax liability to the Income Tax Department.

1. Section 139(1): Mandatory Filing of Return

This subsection outlines who is required to file an ITR.

A. Threshold - Based Filing:

1. Companies and Firms (including LLPs): Mandatory filing, irrespective of whether they
have income or loss.
2. Other Assessees (Individuals, HUF, AOP, BOI, AJP): Mandatory if their Gross Total
Income (GTI) exceeds the Basic Exemption Limit (BEL).
○ Crucial Note: For this threshold, GTI is calculated before claiming deductions under
Chapter VI- A (e.g., 80C- 80U) and capital gains exemptions (e.g., Sec 54 series).

Basic Exemption Limits (BEL) for AY 2024 - 25 & AY 2025 - 26:

Category of Individual Old Tax Regime New Tax Regime (Sec

115BAC)- Default

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 Resident (< 60 years) / ₹ 2,50,000 ₹ 3,00,000
Non- Resident

Resident Senior Citizen (60 ₹ 3,00,000 ₹ 3,00,000

to < 80 years)

Resident Super Senior ₹ 5,0 0 ,0 0 0 ₹ 3,0 0 ,0 0 0

Citizen (≥ 80 years)

(Note: The New Tax Regime

is the default regime from
AY 2024- 25 onwards.)

B. Criteria - Based Mandatory Filing (Provisos to Sec 139(1)):

Filing is mandatory even if GTI is below the BEL in the following specific cases:
1. Foreign Assets (Fourth Proviso): A Resident and Ordinarily Resident (ROR) individual
who:
○ Holds, as a beneficial owner or otherwise, any asset (including financial interest)
located outside India; or
○ Has signing authority in any account located outside India; or
○ Is a beneficiary of any asset located outside India.
2. High - Value Transactions/Other Criteria (Seventh Proviso): If an individual during the
Previous Year (PY):
○ Deposited an aggregate amount > ₹ 1 Crore in one or more current accounts .
○ Incurred expenditure > ₹ 2 Lakhs on foreign travel (for self or others).
○ Incurred expenditure > ₹ 1 Lakh on electricity consumption .
○ Total sales/turnover/gross receipts in business > ₹ 60 Lakhs.
○ Gross receipts in profession > ₹ 10 Lakhs.
○ Aggregate TDS and TCS ≥ ₹ 25,000 (₹ 50,000 for resident senior citizens).
○ Deposited an aggregate amount ≥ ₹ 50 Lakhs in one or more savings bank
accounts .

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2. Due Dates for Filing [Explanation 2 to Section 139(1)]

Category of Assessee Due Date (of the Assessment Year)

Assessee required to furnish report u/s 92E 30th November

(Transfer Pricing)

Company (Domestic or Foreign) 31st October

Person (other than a company) whose 31st October

accounts require audit under any law

Partner of a firm whose accounts require 31st October

audit

All other assessees (e.g., Salaried, Non- 31st July

audit cases)

3. Key Sub- sections of Section 139: Types of Returns and Timelines

Section Type of Return Description Time Limit

139(3) Loss Return To carry forward Due date u/s 139(1)

losses (Business,
Capital, etc.), the
return MUST be
filed by the due
date u/s 139(1).
Exception: House
Property loss and

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 Unabsorbed
Depreciation can
be carried forward
even if filed late.

139(4) Belated Return A return filed after 3 months before

the due date u/s the end of the
139(1). relevant AY (i.e.,
31st Dec of AY) or
completion of
assessment,
whichever is earlier.

139(5) Revised Return To correct an Same as Belated

omission or wrong Return (31st Dec of
statement in a AY).
previously filed
return (Original or
Belated).

139(8A) Updated Return Allows declaration Within 24 months

(ITR- U) of additional from the end of the
income by paying relevant AY.
additional tax (Sec
140B). Cannot be
used for refunds or
reporting losses.

139(9) Defective Return A return with 15 days from

missing intimation.
information/docum
ents. Assessee
usually gets 15
days to rectify
upon intimation.

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PART B: Advance Tax (Sections 207 to 211)

Advance tax follows the "Pay As You Earn" principle, requiring taxpayers to estimate their
income and pay tax in installments during the financial year itself.

1. Liability and Exemptions

● Section 208 (Liability): Advance tax is payable if the estimated tax liability for the
financial year (after considering TDS/TCS) is ₹ 10,000 or more.
● Section 207 (Exemption for Senior Citizens): A resident individual aged 60 years or
more is exempt from paying advance tax, provided they do not have income chargeable
under the head "Profits and Gains of Business or Profession" (PGBP).

2. Computation of Advance Tax and Impact of Amendments

Advance tax is calculated based on the estimated total income for the current financial year
using the applicable slab rates.

CRITICAL AMENDMENTS: Finance (No. 2) Act, 2024 (Effective for AY 2025 - 26)

The Finance (No. 2) Act, 2024, introduced significant changes to the New Tax Regime
(Section 115BAC) . These changes must be incorporated when calculating Advance Tax for
FY 2024- 25 (AY 2025- 26).

A. Increased Deductions (New Regime):

Deduction AY 2024- 25 AY 2025- 26

Standard Deduction ₹ 50,000 ₹ 75,000

(Salary/Pension)

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 Deduction for Family ₹ 15,000 ₹ 25,000
Pension (Max)

B. Revised Tax Slabs (New Regime): A new 25% slab has been introduced.

Income Slab (AY 2024- 25) Income Slab (AY 2025- 26) Rate

Up to ₹ 3,00,000 Up to ₹ 3,00,000 Nil

₹ 3,00,001 to ₹ 6,00,000 ₹ 3,00,001 to ₹ 7,00,000 5%

₹ 6,00,001 to ₹ 9,00,000 ₹ 7,00,001 to ₹ 10,00,000 10%

₹ 9,00,001 to ₹ 12,00,000 ₹ 10,00,001 to ₹ 12,00,000 15%

₹ 12,00,001 to ₹ 15,00,000 ₹ 12,00,001 to ₹ 15,00,000 20%

Above ₹ 15,00,000 Above ₹ 15,00,000 30%

3. Section 211: Due Dates and Installments

A. For General Assessees (Companies, Firms, Individuals not under Presumptive

Scheme):

Due Date (of the Financial Year) Minimum Cumulative Advance Tax Payable

On or before 15th June 15%

On or before 15th September 45%

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 On or before 15th December 75%

On or before 15th March 100%

B. For Assessees opting for Presumptive Taxation (Sec 44AD/44ADA):

100% payable in a single installment on or before 15th March.

PART C: Interest and Fees for Defaults (Sections 234A, 234B, 234C,
234F)
The Income Tax Act levies mandatory interest and fees for non - compliance with timelines.
The interest rate for Sections 234A, 234B, and 234C is Simple Interest (SI) @ 1% per month
or part of the month .

1. Section 234F: Fee for Late Filing of Return

● Trigger: Filing the ITR after the due date u/s 139(1).
● Fee Amount (AY 2024 - 25 & AY 2025 - 26):
○ Standard Fee: ₹ 5,000.
○ Relief for Small Taxpayers: If Total Income ≤ ₹ 5 Lakhs, the fee is ₹ 1,000.

2. Section 234A: Interest for Delay in Filing Return

● Trigger: Filing the return after the due date u/s 139(1).
● Period: From the day immediately following the due date until the date of filing the
return.
● Calculation Base: Outstanding Tax Liability (Assessed Tax less Advance Tax, TDS/TCS,
Reliefs).
○ Note: If all taxes (including Self - Assessment Tax) are paid before the due date, 234A
interest is Nil, even if the return is filed late (though 234F fee will apply).

3. Section 234B: Interest for Default in Payment of Advance Tax

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 ● Trigger: Advance tax paid during the financial year is less than 90% of the "Assessed
Tax".
● Period: From 1st April of the Assessment Year until the date of payment of the
outstanding tax.
● Calculation Base: Shortfall (Assessed Tax minus Advance Tax paid).

4. Section 234C: Interest for Deferment of Advance Tax Installments

● Trigger: Failure to pay the required percentage of tax by the specific installment due
dates.
● Period: 3 months for the first three installments; 1 month for the last installment.

Calculation Table and Safe Harbor Limits (for General Assessees):

Due Date Required % Safe Harbor (No Pe riod

interest if paid ≥)

15th J une 15% 12% 3 Months

15th Se pte mbe r 45% 36% 3 Months

15th De ce mbe r 75% N/A (Must pa y 75%) 3 Months

15th Ma rch 10 0 % N/A (Must pa y 1 Month

10 0 %)

If the Safe Harbor limit is breached, interest is calculated on the shortfall from the Required
% (e.g., shortfall from 15%, not 12%).
● Exceptions (Proviso to Sec 234C): No interest is levied if the shortfall is due to
underestimation or failure to estimate income from Capital Gains, Casual Winnings, new
business, or Dividends, provided the tax on such income is paid in the subsequent
installments.

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PART D: Practical Examples and Numerical Problems (Relevant for AY
2025 - 26)

(Examples incorporate changes from the Finance (No. 2) Act, 2024 where applicable.)

Example 1: Mandatory Filing (High Value Transaction)

● Scenario: Mr. K (Age 45) has a GTI of ₹ 2,90,000 (New Regime BEL ₹ 3,00,000). He
incurred ₹ 2,50,000 on a trip to Thailand during FY 2024 - 25.
● Analysis [Sec 139(1), 7th Proviso]: Although his income is below the BEL, filing is
mandatory as foreign travel expenditure exceeded ₹ 2 Lakhs.
● Answer: He must file his ITR for AY 2025- 26.

Example 2: Loss Return and Belated Filing

● Scenario: PQR Ltd. incurred a business loss of ₹ 5 Lakhs and unabsorbed depreciation
of ₹ 2 Lakhs in FY 2024- 25. Due date: 31st Oct 2025. They filed the return on 1st Dec
2025.
● Analysis [Sec 139(3) & 139(4)]: The return is belated. Business losses cannot be carried
forward if the return is late. However, unabsorbed depreciation is exempt from this rule.
● Answer: PQR Ltd. cannot carry forward the business loss of ₹ 5 Lakhs but can carry
forward the unabsorbed depreciation of ₹ 2 Lakhs.

Example 3: Advance Tax Exemption (Senior Citizen)

● Scenario: Ms. Leela (Age 68, Resident) has interest income of ₹ 6L and runs a small
tuition business with a net profit of ₹ 1L.
● Analysis [Sec 207 & 208]: Although she is a senior citizen, the exemption u/s 207 is not
available because she has PGBP income. If her total tax liability exceeds ₹ 10,000, she
must pay advance tax.
● Answer: Ms. Leela is liable to pay advance tax.

Example 4: Impact of Finance (No. 2) Act 2024 on Advance Tax (AY 2025 - 26)
● Scenario: Mr. M (Salaried, Age 50) estimates his salary income for FY 2024 - 25 at ₹
16,00,000. He uses the New Regime. Calculate his taxable income and tax liability.

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 ● Analysis:
○ Gross Salary: ₹ 16,00,000.
○ Less: Standard Deduction (Increased by FA 2024 No. 2): ₹ 75,000.
○ Taxable Income: ₹ 15,25,000.
○ Tax Calculation (Using new slabs for AY 2025- 26):
■ Up to 15L: ₹ 1,40,000.
■ 15L to 15.25L (₹ 25,000 @ 30% - New Slab): ₹ 7,500 .
○ Total Tax (before Cess): ₹ 1,47,500.
● Answer: His advance tax must be calculated based on the liability of ₹ 1,47,500 (plus
Cess).

● • Rebate under Section 87A: Not applicable, as it is available only for taxable income up
to ₹7,00,000 under the New Tax Regime (with a maximum rebate of ₹20,000). Mr. M’s
taxable income of ₹15,25,000 exceeds this limit.
● • Surcharge: Not applicable, as surcharges apply only when total income exceeds ₹50 lakh
in the New Tax Regime.

Example 5: Interest u/s 234A and Fee u/s 234F

● Scenario: Mr. N (Tota l Income ₹ 5,50 ,0 0 0 ) ha d a due date of 31s t J uly 20 25. His
outsta nding ta x liability (a fte r TDS) was ₹ 10 ,0 0 0 . He file d his re turn and pa id the ta x on
10 th Se pte mbe r 20 25.
● Analysis:
○ Sec 234F: Income > ₹ 5L, re turn file d late . Fe e = ₹ 5,0 0 0 .
○ Sec 234A: De la y pe riod: Augus t, Se pte mbe r (2 months ). Inte re s t = ₹ 10 ,0 0 0 * 1% * 2
months = ₹ 20 0 .

Example 6: Interest u/s 234B

● Scenario: A compa ny's a s se sse d ta x for AY 20 25- 26 is ₹ 2,0 0 ,0 0 0 . It paid ₹ 1,50 ,0 0 0 as
a dvance ta x by Ma rch 20 25. The ba lance ₹ 50 ,0 0 0 wa s paid on 31s t May 20 25.
● Analysis [Sec 234B]: 90 % of a ss e s se d ta x is ₹ 1,80 ,0 0 0 . Adva nce ta x pa id (₹ 1.5L) is
le ss tha n 90 %. Inte re s t is applica ble on the s hortfa ll (₹ 50 ,0 0 0 ). Pe riod: April, Ma y (2
months ).
● Answer: Inte re s t = ₹ 50 ,0 0 0 * 1% * 2 months = ₹ 1,0 0 0 .

Example 7: Interest u/s 234C (Detailed with Safe Harbor)

● Scenario: Tax Lia bility: ₹ 1,0 0 ,0 0 0 . Payme nts : 15 J une : ₹ 10 ,0 0 0 ; 15 Se p: ₹ 50 ,0 0 0
(Cumula tive ); 15 De c: ₹ 70 ,0 0 0 (Cumula tive ); 15 Ma r: ₹ 1,0 0 ,0 0 0 (Cumula tive ).
● Analysis [Sec 234C]:
○ June: Re quire d 15k (Sa fe ha rbor 12k). Pa id 10 k (Sa fe ha rbor bre a che d). Shortfa ll
(15k- 10 k)=5k. Inte re s t: 50 0 0 * 1% * 3m = ₹ 150 .
○ Sep: Re quire d 45k. Pa id 50 k. No s hortfa ll. Inte re s t: ₹ 0 .

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 ○ Dec: Required 75k. Paid 70k. Shortfall (75k- 70k)=5k. Interest: 5000 * 1% * 3m = ₹
150.
○ Mar: Required 100k. Paid 100k. No shortfall. Interest: ₹ 0.
● Answer: Total Interest u/s 234C = ₹ 300.

Example 8: Updated Return (ITR - U) Calculation

● Scenario: Assessee wants to file ITR- U for AY 2023- 24 (Ended 31 Mar 2024) on 1st July
2025. Tax + Interest payable is ₹ 50,000.
● Analysis [Sec 139(8A) & 140B]: Filing is done after 12 months but within 24 months
from the end of the relevant AY. Additional tax rate is 50%.
● Answer: Additional Tax = 50% of ₹ 50,000 = ₹ 25,000. Total Payable = ₹ 75,000.

Example 9: Presumptive Taxation (Sec 44AD) and 234C

● Scenario: A trader opted for Sec 44AD. Tax liability is ₹ 40,000. Paid the entire amount
on 25th March 2025.
● Analysis [Sec 234C]: For presumptive schemes, 100% was due by 15th March. There is
a delay.
● Answer: Interest = ₹ 40,000 * 1% * 1 month = ₹ 400. (Payment made after 15th March
attracts 1 month of interest).

Example 10: Revised vs Belated Return Timeline

● Scenario: Mr. X filed his ITR for AY 2025- 26 on 30th July 2025. In January 2026, he
noticed he missed claiming a deduction.
● Analysis [Sec 139(5)]: The last date to file a revised return for AY 2025 - 26 is 31st
December 2025.
● Answer: He cannot revise the return in January 2026.

PART E: Multiple Choice Questions (MCQs) (Relevant for AY 2025 - 26

& AY 2026- 27)

1. Which entity is required to mandatorily file an Income Tax Return, even if it incurs a loss?
A) Individual
B) Association of Persons (AOP)
C) Limited Liability Partnership (LLP)
D) Hindu Undivided Family (HUF)
2. For AY 2025- 26, what is the last date for filing a Belated Return u/s 139(4) or a Revised
Return u/s 139(5)?

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A) 31st March 2026
B) 31st July 2025
C) 31st December 2025
D) 31st October 2025
3. Which of the following losses can be carried forward even if the return of income is filed
after the due date u/s 139(1)?
A) Speculative Business Loss
B) Long Term Capital Loss
C) Unabsorbed Depreciation
D) Loss from owning and maintaining racehorses
4. As per the Finance (No. 2) Act, 2024, what is the Standard Deduction available under the
New Tax Regime (Sec 115BAC) for AY 2025 - 26?
A) ₹ 50,000
B) ₹ 75,000
C) ₹ 1,00,000
D) Nil
5. A resident senior citizen (Age 65) is exempt from paying Advance Tax if:
A) Their tax liability is less than ₹ 50,000.
B) They only have pension and interest income.
C) They have any income under the head PGBP.
D) They opt for the Old Tax Regime.
6. What is the minimum cumulative percentage of advance tax payable by 15th December for
a regular taxpayer (non - presumptive)?
A) 45%
B) 60%
C) 75%
D) 90%
7. Interest under Section 234B is triggered if the advance tax paid is less than ___ of the
assessed tax.
A) 100%
B) 90%
C) 80%
D) 75%
8. What is the "Safe Harbor" limit for the first installment of advance tax (due 15th June) to
avoid interest u/s 234C?
A) 15%
B) 10%
C) 12%
D) 5%
9. Mr. Y has a total income of ₹ 4,80,000. He filed his ITR after the due date u/s 139(1). What
is the fee payable u/s 234F?
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A) ₹ 10,000
B) ₹ 5,000
C) ₹ 1,000
D) Nil
10. An Updated Return (ITR- U) filed 15 months after the end of the relevant Assessment Year
requires an additional tax payment of:
A) 10% of Tax and Interest
B) 25% of Tax and Interest
C) 50% of Tax and Interest
D) 75% of Tax and Interest

MCQ Answers: 1- C, 2- C, 3- C, 4- B, 5- B, 6- C, 7- B, 8- C, 9- C, 10- C

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