Section 423 — Interest for defaults in furnishing return of income

(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% × A × 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:
TABLE
Sl.
No.
Circumstances Starting date Ending date The amount of tax
on which interest is
payable
A B C D E
1. Where the return is
furnished under sec -
tion 263(1), (4) or (6)
or in response to a
notice under section
268(1) after the due
date.
Due date for
furnishing the
return of income
under section
263(1).
Date of fur -
nishing of the
return.
( a) Where a regu -
lar assessment
is not made,
tax on the total
income as de -
termined under
section 270(1)as
reduced by tax
paid;
( b) Where a regular
assessment is
made, tax on the
total income de-
termined under
regular assess -
ment as reduced
by tax paid.
Sl.
No.
Circumstances Starting date Ending date The amount of tax
on which interest is
payable
A B C D E
2. Where no return has
been furnished un -
der 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 com-
pletion of the
assessment
under section
271.
Tax on the total income
determined under reg-
ular assessment as
reduced by tax paid.
3. ( a) Where return
of income is
required by a
notice under
section 280 is -
sued after the
determination
of income under
section 270(1)or
after the com -
pletion of an as-
sessment under
section 270(10)
or 271 or 279;
and
( b) such return is
furnished after
the expiry of the
time allowed un-
der such notice.
The last date of
time allowed un-
der such notice.
Date of fur -
nishing the
return.
Amount by which the
tax on the total income
determined on the
basis of such reassess-
ment or recomputation
exceeds the tax on the
total income deter -
mined under section
270(1)or on the basis of
the earlier assessment
under section 270(1) or
271 or 279.
4. ( a) Where re-turn
of income is
required by a
notice under
section 280 is -
sued after the
determination
of income under
section 270(1)
or after the
completion of
an assessment
under section
The last date of
time allowed un-
der such notice.
Date of com-
pletion of the
reassessment
or recompu -
tation under
section 279.
Amount by which the
tax on the total income
determined on the
basis of such reassess-
ment or recomputation
exceeds the tax on the
total income deter -
mined under section
270(1) or on the basis
of the earlier assess -
ment under section
270(1) or 271 or 279.
Sl.
No.
Circumstances Starting date Ending date The amount of tax
on which interest is
payable
A B C D E
270(10) or 271
or 279; and
( b) no return is fur-
nished.
(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-sec-
tions (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 such form as may be prescribed speci -
fying 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
99[(vii) any tax credit allowed to be set off as per section 206(2)(e) to (h) and
206(3) and (4).]
99. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause ( vii)
read as under :
“( vii) any tax credit allowed to be set off as per section 206(1)( m) to (p) and 206(2)(e) to
(h).”
(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.