ITR 2025 utility glitch: This error may trigger wrong I-T notices, refund delays
A critical glitch in the Income Tax Return (ITR) utility is incorrectly calculating Section 234C interest, potentially leading to erroneous tax notices and delayed refunds for many taxpayers. Chartered accountants are urging the Income Tax Department to promptly fix this error to avoid widespread complications during the ongoing filing season.
- Jul 29, 2025,
- Updated Jul 29, 2025 5:09 PM IST
A potential glitch in the Income Tax Return (ITR) utility is raising red flags among chartered accountants, who warn that if left uncorrected, it may lead to incorrect interest calculations under Section 234C—potentially resulting in unjustified tax notices and refund delays for compliant taxpayers.
The issue came into focus after Chartered Accountant Aditi Bhardwaj highlighted it on X (formerly Twitter). Bhardwaj pointed out that the current version of the ITR software automatically calculates and populates interest under Section 234C, even in cases where no such interest is legally applicable. She urged the Income Tax Department to review and fix the issue, noting that while the interest field is editable in the utility, taxpayers remain uncertain whether manual corrections could trigger system errors or delays during processing.
“As per law, interest under Section 234C is not applicable when the net tax liability is less than ₹10,000. However, the current ITR software wrongly auto-populates this interest,” Bhardwaj posted, tagging @IncomeTaxIndia. “Even though the field is editable, we want assurance that overriding it won’t cause issues during return processing.”
What is Section 234C?
Section 234C of the Income-tax Act, 1961 imposes interest on taxpayers who miss the prescribed advance tax payment deadlines. Advance tax becomes applicable when your total tax liability exceeds ₹10,000 in a financial year, after accounting for TDS and TCS. Interest is levied at 1% per month on the shortfall and applies to four key advance tax due dates—June 15, September 15, December 15, and March 15.
What’s the problem with the ITR utility?
CA (Dr.) Suresh Surana told the Economic Times that the concern is valid and serious. He explains that while the law clearly exempts taxpayers with net liabilities under ₹10,000 from Section 234C interest, the ITR utility disregards this exemption and calculates interest automatically—even when not warranted.
“The utility appears to ignore TDS and TCS credits while computing the net tax liability. This leads to interest being wrongly levied under Section 234C,” said Surana. “Though the field is editable, taxpayers are worried that manual corrections might lead to mismatches and automated tax notices from the Centralized Processing Centre (CPC).”
He adds that this glitch does not appear in the offline Excel utility, which factors in TDS/TCS credits more accurately.
What happens now?
Surana outlines multiple implications if the error remains unresolved:
Excess interest payment: Taxpayers may pay more than necessary in interest under Section 234C, increasing their tax burden without legal justification.
Automated Tax Notices: If taxpayers manually correct the error, the IT department’s system may flag it as a mismatch, potentially triggering notices under Section 143(1) for tax or interest discrepancies.
Refund delays: For taxpayers due refunds, especially salaried individuals or those with TDS/TCS refunds, mismatches could slow down refund processing or require them to file rectifications or respond to avoidable notices.
“Timely intervention is critical,” Surana stressed. “Without a fix, this could create needless disputes and complications for honest taxpayers.”
The second proviso to Section 234C(1) clearly states that interest is not leviable if the net tax payable, after TDS, TCS, and other credits, is less than Rs 10,000. This safeguard was introduced to prevent overburdening small taxpayers and salaried individuals with minor tax shortfalls.
I-T department steps
As of now, the Income Tax Department has not officially acknowledged this specific glitch, despite its ongoing efforts to simplify and automate tax compliance. Tax experts, however, stress that swift action and clear communication are essential to prevent widespread confusion and hardship during the current filing season.
With the ITR filing deadline approaching, stakeholders hope the department will issue a formal clarification and update the utility to ensure accurate, legally compliant interest calculations. Until then, taxpayers, especially those with net tax liabilities near the Rs 10,000 threshold, are advised to consult qualified professionals before submitting their returns.
A potential glitch in the Income Tax Return (ITR) utility is raising red flags among chartered accountants, who warn that if left uncorrected, it may lead to incorrect interest calculations under Section 234C—potentially resulting in unjustified tax notices and refund delays for compliant taxpayers.
The issue came into focus after Chartered Accountant Aditi Bhardwaj highlighted it on X (formerly Twitter). Bhardwaj pointed out that the current version of the ITR software automatically calculates and populates interest under Section 234C, even in cases where no such interest is legally applicable. She urged the Income Tax Department to review and fix the issue, noting that while the interest field is editable in the utility, taxpayers remain uncertain whether manual corrections could trigger system errors or delays during processing.
“As per law, interest under Section 234C is not applicable when the net tax liability is less than ₹10,000. However, the current ITR software wrongly auto-populates this interest,” Bhardwaj posted, tagging @IncomeTaxIndia. “Even though the field is editable, we want assurance that overriding it won’t cause issues during return processing.”
What is Section 234C?
Section 234C of the Income-tax Act, 1961 imposes interest on taxpayers who miss the prescribed advance tax payment deadlines. Advance tax becomes applicable when your total tax liability exceeds ₹10,000 in a financial year, after accounting for TDS and TCS. Interest is levied at 1% per month on the shortfall and applies to four key advance tax due dates—June 15, September 15, December 15, and March 15.
What’s the problem with the ITR utility?
CA (Dr.) Suresh Surana told the Economic Times that the concern is valid and serious. He explains that while the law clearly exempts taxpayers with net liabilities under ₹10,000 from Section 234C interest, the ITR utility disregards this exemption and calculates interest automatically—even when not warranted.
“The utility appears to ignore TDS and TCS credits while computing the net tax liability. This leads to interest being wrongly levied under Section 234C,” said Surana. “Though the field is editable, taxpayers are worried that manual corrections might lead to mismatches and automated tax notices from the Centralized Processing Centre (CPC).”
He adds that this glitch does not appear in the offline Excel utility, which factors in TDS/TCS credits more accurately.
What happens now?
Surana outlines multiple implications if the error remains unresolved:
Excess interest payment: Taxpayers may pay more than necessary in interest under Section 234C, increasing their tax burden without legal justification.
Automated Tax Notices: If taxpayers manually correct the error, the IT department’s system may flag it as a mismatch, potentially triggering notices under Section 143(1) for tax or interest discrepancies.
Refund delays: For taxpayers due refunds, especially salaried individuals or those with TDS/TCS refunds, mismatches could slow down refund processing or require them to file rectifications or respond to avoidable notices.
“Timely intervention is critical,” Surana stressed. “Without a fix, this could create needless disputes and complications for honest taxpayers.”
The second proviso to Section 234C(1) clearly states that interest is not leviable if the net tax payable, after TDS, TCS, and other credits, is less than Rs 10,000. This safeguard was introduced to prevent overburdening small taxpayers and salaried individuals with minor tax shortfalls.
I-T department steps
As of now, the Income Tax Department has not officially acknowledged this specific glitch, despite its ongoing efforts to simplify and automate tax compliance. Tax experts, however, stress that swift action and clear communication are essential to prevent widespread confusion and hardship during the current filing season.
With the ITR filing deadline approaching, stakeholders hope the department will issue a formal clarification and update the utility to ensure accurate, legally compliant interest calculations. Until then, taxpayers, especially those with net tax liabilities near the Rs 10,000 threshold, are advised to consult qualified professionals before submitting their returns.