Skip to main content

Interest on Tax Payable Under Section 234A, Section 234B, Section 234C

 

Late Filing of Income Tax Return

If you have missed out the due date for filing the Income Tax Return and you have tax dues which are to be paid to the government, than you should first understand the interest liability that you'd incur while filing a belated return.

To understand different interest types of interest, we will have to gain knowledge about the provisions of section 234A, 234B and 234C dealing with interest for

  • 234A – Delay in filing the return of income
  • 234B – Non-payment or short payment of advance tax; and
  • 234C- Non-payment or short payment of individual instalment or instalments of advance tax (i.e., deferment of advance tax)

First thing to be kept in mind while determining the interest payable under all these sections is that interest is to be calculated @ 1% per month or part thereof. So even if you are late in filing the return by 10 days, you'll incur the interest for a whole month.

 

ITR Interest Penalty u/s 234A, 234B, 234C

Section 234A – Delay in filing the return of income

The taxpayer will be liable to pay the interest @ 1% per month or part thereof for delay in filing the Income Tax Return.

Illustration:

Mr. Darshan is a doctor. The due date of filing the return of income in his case is 31st July, 2015. He filed his return of income on 11th November, 2015. His tax liability for the financial year 2014-15 is Rs. 11,250 (which is paid on 11th November, 2015).

In this case, Mr. Darshan has filed his return after the due date and hence he will be liable to pay interest under section 234A

Interest Amount:- Rs. 11,250 x 4 months x 1% =  Rs.450/-

 

Section 234B – Non-payment or short payment of advance tax

Interest under section 234B is to be paid in case of following two situations:

  1. If advance tax has not been paid even though the taxpayer is liable to pay advance tax or,
  2. Where the advance tax paid is less than 90% of the assessed tax*.

* Assessed tax = (Total tax liability – TDS/TCS)

As per section 208 of the Act, Advance tax is to be paid by the assessee if his estimated tax liability for a particular financial year is Rs. 10,000 or more.

Calculation of Advance Tax

Advance Tax is to be paid by estimating the current year income and then applying the tax rates as per the Income Tax Slabs in force. The Advance Tax shall be computed as under:

Advance Tax Calculation

Illustration:

Mr. Atul is running a small business. His tax liability for the year is Rs. 32,500. He has not paid any advance tax till 31st March but he has a TDS credit of Rs 5000. Entire tax was paid by him at the time of filing the return of income on 31st July.

In this case, since he has not paid any advance tax, interest will be calculated from the 1st day of the assessment year till the day of paying the tax and filing the return.

So interest under section 234B works out to be:

Rs. 27,500 i.e (Rs 32,500 – Rs 5000) x 4 months x 1% = Rs 1100

Section 234C- Non-payment or short payment of individual instalment or instalments of advance tax (i.e., deferment of advance tax)

As discussed above, an assessee is liable to pay advance tax as per section 208 of the Act, if his estimated tax liability for a particular financial year is Rs. 10,000 or more.

Advance tax is to be paid in instalments as given below:

Status            By 15th JuneBy 15th Sept.By 15th Dec.By 15th March
Non-Corporate taxpayersNilUpto 30% of advance taxUpto 60% of advance taxUpto 100% of advance tax
Corporate taxpayersUpto 15% of advance taxUpto 45% of advance taxUpto 75% of advance taxUpto 100% of advance tax

So in case of deferment or short payment of advance tax in case of non-corporate assessee, interest is to be calculated as follows:

ScenarioInterest
If paid Less than 30% of advance tax upto 15th September1% per month i.e. 3 months on the shortfall amount below 30%
Less than 60% upto 15th December1% per month i.e. 3 months on the shortfall amount below 60%
Not 100% Upto 15th March1%  on the shortfall amount below 100% for 1 month

Illustration:

Mr. Pratik is running a small shop. His tax liability is Rs. 41,500. He has paid advance tax as given below:

  • Rs. 15,000 on 15th September,
  • Rs. 5,000 on 15th December,
  • Rs. 18,400 on 15th March.

So the interest liability will be calculated as follows:

For the First instalment of 15th September:

Advance tax to be paid = Rs. 41,500 x 30% = Rs. 12,450

Mr. Pratik has paid Rs. 15,000 so there is no shortfall and thus no interest is to be paid

For the Second instalment of 15th December:

Advance tax to be paid = Rs. 41,500 x 60% = Rs. 24,900

Total advance tax paid so far is Rs. 20,000 (Rs. 15,000 + Rs. 5000) so the interest on shortfall will be: (Rs. 24,900 – Rs. 20,000) x 3 months x 1% = Rs. 4900 x 3 months x 1% = Rs. 147

For the Third instalment of 15th March:

Advance tax to be paid = Rs. 41,500 x 100% = Rs. 41,500

Total advance tax paid so far is Rs. 3100 (Rs. 15,000 + Rs. 5000+ Rs 18,400) so the interest on shortfall will be: (Rs. 41,500 – Rs. 38,400) x 3 months x 1% = Rs. 3100 x 1 months x 1% = Rs. 31

Important Note: The last date for efiling of IT returns has been extended to 31st August for Assessment Year 2015-16.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online

Invest in Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now