(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% x A x 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
| Sl. No. | Circumstances | Starting Date | Ending Date | The Amount of Tax on Which Interest Is Payable |
| 1 | Where the return is furnished: | Due date for furnishing the return of income under section 263(1) | Date of furnishing the return | (a) If no regular assessment is made: Tax on total income determined under section 270(1), reduced by tax paid. |
| (a) Under section 263(1), (4), or (6). | (b) If regular assessment is made: Tax on total income determined under regular assessment, reduced by tax paid. | |||
| (b) In response to a notice under section 268(1) after the due date. | ||||
| 2 | Where no return has been furnished under section 263(1), (4), or (6) or in response to a notice under section 268(1). | Due date for furnishing the return of income under section 263(1) | Date of completion of the assessment under section 271 | Tax on the total income determined under regular assessment, reduced by tax paid. |
| 3 | (a) Return required by notice under section issued after determination of income under section 270(1) or after completion of an assessment under section 270(10), 271, or 279. | Date immediately following the last date of time allowed under the notice | Date of furnishing the return | Tax amount by which the reassessed income exceeds the tax on income determined under section 270(1) or earlier assessment. |
| (b) Return furnished after expiry of time allowed. | ||||
| 4 | (a) Return required by notice under section 280 issued after determination of income under section 270(1) or after assessment under section 270(10), 271, or 279. | Date immediately following the last date of time allowed under such notice | Date of completion of reassessment or recomputation under section 279 | Tax amount by which the reassessed income exceeds the tax on income determined under section 270(1) or earlier assessment. |
| (b) No return furnished. |
(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-sections (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 the form as 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) 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
(vii) any tax credit allowed to be set off as per section 206(13).
(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.
