Answer Posted / h.r. sreepada bhagi

From Taxation Point (Statutory Payments) of view:

Any amount charged by any tax /government department (Income
Tax, Central Excise, Commercial Tax, EPF, ESI, etc.) for
non-compliance is penalty. For example due date for filing a
tax return is month end. if it's delayed, there may be a
fixed amount to be paid for each day of delay. This is penalty.

Any amount charged by any tax /government department (Income
Tax, Central Excise, Commercial Tax, EPF, ESI, etc.) for
non-payment or delay in payment/remittance is interest. For
example due date for payment of a tax amount month end. if
it's delayed or not paid, a fixed rate of interest will be
charged on the basic amount delayed or defaulted.

Some times the terms interest & penalty are used to mean the
same thing particularly in taxation. (E.g. refer Sections
234 A/B/C of Income tax Act, 1961)

In general interest refers to the amount payable at an
agreed percentage on the money borrowed by the borrower to
the lender. In banks & final institutions, if there is
default or delay in payment of interest, they charge a
higher rate or additional interest and call it as penal
interest.

In any case penalty or penal interest is the result of
failure to comply with the agreed terms, meet the dead line
or pay the dues / instalment on or before the due date.

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