Section 234A is attracted in case you fail to file tax return as per Section 139(1). Read more about Section 139(1). Interest is payable if file your tax return late i.e. after the due date or if you do not file the tax return at all. In the latter case, interest is to be paid at the time of assessment.
Section 234A provides a simple interest of 1% per month. It is calculated on your tax liability. In case you file the tax return, the period for interest computation starts from the due date to file the tax return and ends on the date when you file your tax return. In case you do not file the tax return at all, the period for interest computation starts from the due date to file the tax return and ends on the date when the assessment is completed by the Assessing Officer.
The interest is calculated on the total amount of tax as determined under Section 143(1) through a computer generated automated message which lets the you know of any error that exists in your tax filing or on regular assessment. Any advance tax paid, tax deducted at source as well as tax collected at source, any relief or tax credit is allowed to be set-off before the interest is computed.
If you pay full amount of tax on self-assessment on or before the due date of filing of your tax return, interest under Section 234A is not charged.
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