In
today’s world, compliance and timely deposit of taxes and returns are of
paramount importance. It can save assessees from mandatory interests, late
fines and other issues.
Under
Income-tax Act, A corporate assessee 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.
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:
|
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)
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.
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