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

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
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