Tax Updates

What Missing a Due Date Actually Costs: Late Fees, Interest and Penalties in FY 2026-27

The late fee is rarely the expensive part. Two hundred rupees a day on a TDS return looks survivable, and it usually is. What does the damage is the interest running alongside it, the deduction you forfeit, and in GST, a three-year door that now closes for good on returns you never got around to filing. Businesses tend to budget for the fee and get caught by everything else.

Every missed deadline on this list triggers two separate charges: a fixed fee for the delay, and interest on money you held back. The fee is almost always capped. The interest is not, and on both TDS and GST it works out to 18% a year.

TDS: the one that compounds

TDS carries two different interest rates and most people quote the wrong one. If you never deducted in the first place, interest runs at 1% a month from the date the tax was deductible. If you deducted and then sat on the money, it runs at 1.5% a month from the date of deduction until the cash actually reaches the government. Both are simple interest under Section 398(3), and both treat part of a month as a full month, so a payment two days late costs the same as one thirty days late.

Part of a month counts as a full month for both interest rates.

Two things in that table are worth pausing on. The ₹200-a-day statement fee under Section 427(1) is capped at the amount of tax deductible, so on a small quarter it self-limits fairly quickly. The Section 461 penalty is the one with teeth, and Section 461(2) gives you a way out: no penalty applies if the tax, fee and interest are paid and the statement is filed within one month of the prescribed date. Miss that window and the assessing officer's discretion is all that stands between you and ₹1,00,000.

Then there is the disallowance. Where tax was deductible on an expense and you did not deduct it, 30% of that expense is disallowed under Section 35. On a ₹10 lakh contractor bill that is ₹3 lakh added back to taxable income, which at 25% costs ₹75,000 in tax before any interest enters the picture. That is usually far more than the fee that prompted the client to call.

GST: the fee is capped, the door is not

GST late fees are modest and predictable. ₹50 a day on GSTR-3B and GSTR-1, ₹20 a day if the return is nil, and a hard cap that scales with turnover.

Caps per Notification 19/2021-Central Tax. The annual return GSTR-9 has its own scale under Notification 07/2023, ranging from ₹50 to ₹200 a day with the cap set as a percentage of turnover.

Interest is the real charge. Section 50(1) of the CGST Act runs at 18% a year on tax paid late, and Section 50(3) doubles that to 24% where input tax credit was wrongly availed and utilised. Neither is capped.

The provision that catches people out is newer. Since 1 October 2025, a GST return simply cannot be filed once three years have elapsed from its due date. There is no fee that reopens it and no application that revives it. For a business that abandoned a dormant registration and left a trail of unfiled GSTR-1s, the practical effect is that the recipient's input tax credit is gone permanently and the liability sits unreconciled on the portal forever. If you have old gaps, the time to close them is now, and the compliance calendar will tell you which periods are approaching the cut-off.

The income tax return

Filing late costs a flat fee under Section 428: ₹1,000 if total income does not exceed ₹5,00,000, and ₹5,000 for everyone else. Interest under Section 423 adds 1% a month on the unpaid tax from the day after the due date until you file. Section 428 was substituted by the Finance Act, 2026, and now also covers returns furnished under Section 263(5) beyond nine months from the end of the tax year, at the same rates.

For salaried filers the fee is often the whole story, since tax is already deducted. For businesses it rarely is, because the Section 423 interest sits on top of the advance tax interest under Sections 424 and 425, and the three run concurrently. We have written separately on the mistakes that cause returns to be filed late or wrong.

ROC: the one with no ceiling

Every other charge on this page stops somewhere. The MCA additional fee does not. AOC-4 and MGT-7 filed after their due dates attract ₹100 per day, per form, and it accrues until the day you file. A company that forgets its annual filings for two years is looking at roughly ₹73,000 per form before the separate penalties under Sections 137(3) and 92(5) of the Companies Act are considered, which fall on the company and on the officers in default individually.

DIR-3 KYC works differently and catches directors who assume it does not apply to them. Miss 30 September and the DIN is deactivated, and reactivating it costs a flat ₹5,000. A deactivated DIN blocks every other filing that director needs to sign, which is how one missed form turns into a stalled quarter. The ROC dates for the year are laid out in our ROC compliance calendar, and October 2026 is the month to watch - it carries 20 due dates, four of them ROC filings.

PF, ESIC and profession tax

Payroll dues attract interest and damages as two separate heads, which is why the demand notice is always larger than the arrears. EPF charges 12% a year under Section 7Q, plus damages under Section 14B assessed separately by the EPFO. ESIC charges 12% a year under Regulation 31A with damages under Regulation 31C on top. In Maharashtra, profession tax runs at 1.25% a month with a ₹1,000 fee for a late PTRC return.

The 15th of each month covers both EPF and ESIC, which makes it the single most commonly missed date we see - it falls close enough to the GSTR-1 deadline on the 11th that payroll gets deprioritised in a busy week.

What one missed month actually costs

Take a company with ₹3 crore turnover that misses July 2026 across the board and catches up on 20 November 2026. Nothing dramatic - one quarter where the accountant left and the handover slipped.

Illustrative only. Actual liability depends on the exact dates of deduction and payment.

Twenty-five thousand rupees, on ₹3 lakh of tax, for one month of drift. The fees account for ₹8,600 of it. The rest is interest, which is the part nobody budgets for. Add a Section 461 penalty if the TDS statement had slipped past the one-month grace, and the number doubles.

If you have already missed one

File first, then worry about the money. On GST and TDS the fee accrues per day, so every day spent deciding what to do costs more than the decision is worth. Once the return is in, the fee stops and only the interest keeps running on the unpaid tax.

For a late TDS statement, check the calendar before anything else. If you are still within one month of the due date, paying the tax, fee and interest and filing immediately removes the Section 461 penalty entirely under sub-section (2). That single month is worth up to ₹1,00,000, and it is the most valuable deadline in this entire post.

For GST, pull the return status for every period going back to 2022 and check nothing is approaching the three-year bar. This is the one default that becomes genuinely irreversible, and it arrives quietly because no notice is issued when the window closes.

The free compliance calendar lists every statutory due date for FY 2026-27, filtered by category, and will export the month to your phone calendar with a reminder three days before each deadline. Month pages are available for August 2026, September 2026 and October 2026, through to March 2027.

Frequently asked questions

Written by CA Karan Shah

Founder of KC Shah & Associates. Provides outsourced accounting, MSME compliance monitoring, Zoho Books implementation and Virtual CFO services to startups and SMEs across India.