Interest U/s 234A, 234B and 234C

In today’s world, compliance & timely deposit of taxes and filing of tax returns are of paramount importance. It can save assessees from mandatory interests, late fees and fines and other issues.

 

Under Income-tax Act, Corporate assessees as well as non-corporate assessees are liable for interest when he fails to deposit taxes on time or returns are filing beyond the due dates. These penal interests are specified in section 234A, 234B and 234C of Income-tax Act, 1961. The same are discussed in following lines:

 

Section 234A: Interest for defaults in furnishing return of Income

Where an asseesee is failed to file his Income Tax Return U/s 139(1) or 139(4) or in response to notice U/s 142(1), he shall be liable for interest U/s 234A.

 

Case	Amount (Rs.) on which Interest is to be calculated	Simple Interest Rate	Period for which interest is to be charged
I)          In case of ITR is furnished after due date under self assessment basis	Tax on Returned Income as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent) per month or part of month	Commencing on the date immediately following the due date AND ended on the date of furnishing of ITR
II)          In case of ITR is furnished after due date and regular assessment is done	Step 1: Tax on Assessed Income as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD   Step 2 Tax on Assessed Income as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD 5)   Self Assessment Tax Paid**	1 % (One Percent) per month or part of month	Period for Step 1 Commencing on the date immediately following the due date AND ended on the date of furnishing of ITR   Period for Step 2 Commencing on the date immediately following the due date AND ended on the dates of assessment ended on the date of furnishing of ITR
III)       In case of ITR not furnished and assessment is done U/s 144	Tax on Assessed Income as reduced by 1)     Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent) per month or part of month	Commencing on the date immediately following the due date AND ended on the dates of assessment ended on the date of furnishing of ITR

** as affirmed by Hon’ble Supreme Court in case of Dr. Prannoy Roy Vs. CIT

 

Section 234B: Interest for defaults for payment of advance tax

An assessee is required to pay advance tax during the financial year itself. Where advance tax paid is les than 90% of assessed tax, interest under section 234B  is required to be paid.

Case	Amount (Rs.) on which Interest is to be calculated	Simple Interest Rate	Period for which interest is to be charged
I)    In case of ITR is furnished and income is determined U/s 143(1)	Tax on Income Determined U/s 143(1)* as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent) per month or part of month	Commencing on April 1 immediately following the financial year AND ended on date of determination of income U/s 143(1)
II) In case of ITR is furnished and income is assessed under regular assessment	Tax on Assessed Income as reduced by 1)         Advance Tax Paid 2)         TDS/TCS 3)         Relief U/s 90 or 90A or 91 4)         Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent) per month or part of month	Commencing on April 1 immediately following the financial year AND ended on date of  assessment  under regular assessment

*At the time of filing of ITR, interest U/s 234B shall be calculated on self assessed tax and the same should be paid alongwith self assessment tax.

Section 234C: Interest on deferment of advance tax

 An assessee should pay his installment of advance tax on time. If he does not pay his advance tax installments on time, he shall be liable for interest U/s 234C which is as follows:

 

A)  Assessees other than mentioned U/s 44AD or 44ADA

 

Installments	Amount (Rs.) on which Interest is to be calculated	Simple Interest Rate	Period for which interest is to be charged
First   (upto 15% of advance tax liability) (on or before June 15)	Tax on Returned Income as reduced by 1)  Advance Tax Paid 2)  TDS/TCS 3)  Relief U/s 90 or 90A or 91 4)  Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent)   Note: If the first instalment paid by the assess is less than 12% of advance tax liability on returned income	3 (three) months
Second (upto 45% of advance tax liability) (on or before September 15)	Tax on Returned Income as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent)   Note: If the first instalment paid by the assess is less than 36% of advance tax liability on returned income	3 (three) months
Third (upto 75% of advance tax liability) (on or before December 15)	Tax on Returned Income as reduced by 1)   Advance Tax Paid 2)   TDS/TCS 3)   Relief U/s 90 or 90A or 91 4)   Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent)	3 (three) months
Fourth (upto 100% of advance tax liability) (on or before March 15)	Tax on Returned Income as reduced by 1)     Advance Tax Paid 2)     TDS/TCS 3)     Relief U/s 90 or 90A or 91 4)     Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent)	1 (one) month

 

B)        B) Assessees  who declares his income U/s 44AD or 44ADA

Installments	Amount (Rs.) on which Interest is to be calculated	Simple Interest Rate	Period for which interest is to be charged
Only One   (upto 100% of advance tax liability) (on or before March 15)	Tax on Returned Income as reduced by 1)      Advance Tax Paid 2)      TDS/TCS 3)      Relief U/s 90 or 90A or 91 4)      Tax credit allowed to be set off U/s 115JAA or 115JD	1 % (One Percent)	1 (one) month

C) In case of following incomes, interest U/s 234C shall be calculated on the            amount falls shorts from remaining installments of advance tax where advance tax installments are remaining. Where no advance tax installments are left, interest shall be calculated on the amount falls short for payment by March 31:

             i)                   Capital Gains

ii)                Winnings from lotteries or crossword puzzles, races including horse races, card games and other games of any sorts or from ambling or betting of any form or nature

iii)             Income under head PGBP for the first time

iv)              Dividend Income as u/s 115BBDA

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

Due date for Payment of Advance Tax (Income Tax)

What is advance tax under Income-tax Act, 1961?

As the name suggests itself, advance tax means tax which is required to pay in advance or before the end of financial year on estimated income of that financial year.

 

Who are required to pay advance tax?

 

Every assessee is required to pay income tax in advance on the income which is chargeable to tax in an assessment year immediately following the financial year.

 

Exception:

Individual who is of 60 years at any time during the financial years AND does not have any business or professional income during the year.

 

How to compute advance tax liability?

Advance tax is computed in the following manner

A)  Estimated Income

B)    Less: Deductions

C)   Net Estimated Taxable Income (A-B)

D)  Tax on the Estimated Income (tax rate shall be as applicable in the financial year)

E)    Less: Estimated Tax Deducted at Source (TDS)

F)    Advance Tax (F=D-E)

Assessing Officer (AO) may make calculation of advance tax liability of the assessee in the following manner:

Advance Tax liability = Tax rate applicable

X      (multiplied by)

higher of (Latest assessed income by way of regular assessment by AO or Latest Returned income as filed by assessee for any subsequent year)

 

 

Instalments of Advance Tax and due dates (As applicable w.e.f. June 01, 2016)

 

a)     All the assesses (other than Section 44AD or 44ADA cases) are required to pay advance tax instalments as per below table:

 

Instalments	Due Date	Amount Payable
First	On or before June 15	15 % of advance tax
Second	On or before September 15	45% of advance tax
Third	On or before December 15	75% of advance tax
Fourth	On or before March 15	100% of advance tax

 

b)  An assessee who declares his business under Section 44AD or professional income under 44ADA, required to pay advance tax on or before March 15 (i.e. Such assessee have only one installment and they are required to pay 100% of their advance tax on or before March 15)

c)  Where any person pays income tax in advance even before March 31, the same is also be treated as advance tax.

 

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.