Interest u/s Sec 234A, 234B & 234C of IT Act
My this blog is related to tell you about Penalty of Interest on Income Tax under Sec 234A, 234B, 234C as per Income Tax Act.
1% Simple Interest on the Tax Amount due
Section 234A: Delay in filing Income Tax Return
- Interest under section 234A is imposed when there’s a delay in filing income tax returns.
- The due date for filing the returns is usually before July 31 of every following assessment year.
- Under this Section, interest is charged at 1 % on the outstanding tax amount and must be paid from the first day after the due date of filing the return until the date of the actual filing of the return.
Example:
Geeta has a total tax outstanding of Rs. 3,00,000 (Including net advance tax
and TDS) Instead of filing her returns on July 31, she files it on January 20.
She is now late by 6 months on the tax payment. Here’s how much she’s liable to
pay:
Interest =
3,00,000 X 1% X 6 = Rs. 18000
Geeta will now have to pay Rs. 18,000 after the tax amount. The interest will continue until March 31st that is the end of the assessment year.
Section 234B: Non Payment or Short Payment of Advance Tax
- Interest under section 234B is imposed if you make incomplete tax payments.
- It is also levied in case of a delay in the payment of advance tax.
- You must pay interest under Section 234B if you are liable to pay advance tax but have failed to do so. However, it is also imposed if you have paid advance tax but the amount is less than 90% of the assessed tax.
Example:
Veena must pay a total tax of Rs. 2,00,000 for the current fiscal year. The TDS
deduction amounted to Rs. 1,85,000. On March 25, Veena paid Rs. 7,000 while the
balance amount of Rs. 8,000 was paid on July 26. Let’s calculate the penalty
now:
Assessed tax
= Total Tax – TDS
= Rs.
2,00,000 – Rs. 1,85,000
= Rs. 15,000
Veena should
have paid at least 90% of Rs. 15,000 which amounts to Rs. 13,500 on March 31.
However, Veena only made a payment of Rs. 7,000. Hence Veena will have to pay
an interest penalty on the assessed tax.
So Veena has
to pay:
Rs. 13,500 x 1% x 4 months (till July) = Rs. 540.
Hence Veena is liable to pay Rs. 540, as a penalty on the interest of the assessed tax,
under Section 234B.
Section 234C: Deferment of Advance Tax
- Interest under section 234C is imposed when there is a delay in payment of an installment of advance tax.
- The interest on late payment is calculated at 1% simple interest on the tax amount due.
- Not Applicable in case of a tax payer other than opting for presumptive income u/s 44AD.
So we can calculate the interest in the following manner:
|
Period of Amount on which |
Rate of Interest |
Period of Interest |
Amount on which interest is calculated |
|
If Advance Tax paid on or before June 15 is
less than 15% of the Amount* |
Simple interest @1% per month |
3 months |
15% of Amount* less tax already deposited
before June 15 |
|
If Advance Tax paid on or before September
15 is less than 45% of the Amount* |
Simple interest @1% per month |
3 months |
45% of Amount* less tax already deposited
before September 15 |
|
If Advance Tax paid on or before December 15
is less than 75% of the Amount* |
Simple interest @1% per month |
3 months |
75% of Amount* less tax already deposited
before December 15 |
|
If Advance Tax paid on or before March 15 is
less than 100% of the Amount* |
Simple interest @1% per month |
3 months |
100% of Amount* less tax already deposited
before March 15 |
*Amount = Tax
on total income less TDS less relief u/s 90 or 91 less tax credit u/s 115JD
Example:
Priya's total tax liability for this financial year is Rs. 100,000 it needs to be paid in installments.
Calculation:
|
Payment Dates |
Advance Tax payable |
Total Advance Tax paid |
Shortfall (Cumulative) |
Penalties (Cumulative) |
|
15th
June |
15,000 |
5,000 |
10,000 |
@1%*3*10,000 = 300 |
|
15th
September |
45,000 |
25,000 |
20,000 |
@1%*3*20,000 =600 |
|
15th
December |
75,000 |
35,000 |
40,000 |
@1%*3*40,000 =1200 |
|
15th
March |
100,000 |
50,000 |
50,000 |
@1%*1*50,000 =500 |
So the total interest that you need to pay is Rs. 2600.
As a conclusion, so it is best to file your Income Tax Return on time and help the nation to grow for timely payment of Tax.
I hope it will be helpful to you.
Thanks and Regards
Kulvinder Kaur
B.Com(H), MBA (Finance)
9871580806,8826566751
rightsteptoinvest@gmail.com
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