Section 234A- Interest for Delay in Filing the Return of Income

In section 234A, interest is levied for delay in filing the ITR, filing of an updated return or filing of a return in response to notice issued u/s 142(1). In other words, if the taxpayer files the ITR after the specified due date then the interest u/s 234A will be levied.

Rate of interest -Interest u/s 234A is levied for delay in filing the ITR. Interest is levied @1% per month or part of a month. The nature of interest is simple interest. In other words, the taxpayer is liable to pay simple interest @ 1% /month or part of a month for delay in filing the ITR.

Period of levy of interest u/s 234A – Interest u/s 234A is levied from the period commencing on the date immediately following the due date of filing the ITR and ending on the date of furnishing the return of income, or in case where no return has been furnished, on the date of completion of the assessment u/s 144. It should be noted that while computing the period of levy of interest, part.

Section 234B

Section 234B is for levy of interest for default in payment of advance tax.

Interest u/s 234B is levied in these cases:

  • When the taxpayer has failed to pay advance tax though he/she is liable to pay advance tax; or
  • Where the advance tax paid by the taxpayer is less than 90% of the assessed tax.

According to the Section 208 of the Act, advance tax will be payable by the taxpayer during the FY if estimated tax liability of assessee during that year is INR 10000 or more.

Rate of interest – U/S 234B, interest for default in payment of advance tax is levied @1% per month or part of a month. The nature of interest is simple interest. In other words, the taxpayer is liable to pay simple interest @ 1% / month or part of a month for default in payment of advance tax.

Amount liable for interest- Interest u/s 234B is levied on the amount of unpaid advance tax. If there is a shortfall in payment of advance tax, then interest is levied on the amount by which advance tax is short paid. The amount of unpaid/short paid advance tax is calculated as below:

 Particulars Amount  Amount
Assessed tax (*)XXXXX
Less : Advance tax paid (if any)(XXXXX)
Amount of unpaid/short paid advance taxXXXXX

(*) Assessed tax means the amount of tax as determined u/s 143(1) and where regular assessment is made, the tax on total income as determined under such regular assessment as reduced by tax deducted/collected at source, relief/deduction of tax claimed under various sections like sections 89/90/90A/91 and tax credit claimed u/s 115JAA/115JD.

Tax on total income determined u/s 143(1) will not include the additional income-tax, if any, payable u/s 140B or section 143 and tax on total income determined under regular assessment will not include the additional income-tax payable u/s 140B.

Period of levy of interest- Interest u/s 234B is levied from the 1st  day of the AY, i.e., from 1st April till the date of determination of income u/s 143(1) or when a regular assessment is made, then till the date of such a regular assessment.

In a case where the income is increased on account of assessment/re-computation, interest u/s 234B will be levied on the differential amount from the first day of the assessment year till the date of assessment/re-computation. In a case where an application is made to the Settlement Commission, interest u/s 234B will be levied on the differential amount from the first day of the assessment year till the date of making the application. Further, if the income as declared in the application is increased by the Settlement Commission, interest u/s 234B will be levied on the differential amount from the first day of the AY till the date of such order. If as a result of the rectification order of the Settlement Commission, income is increased/decreased, interest will also be increased/decreased accordingly. If the taxpayer has paid any tax before completion of assessment, then interest will determined as follows:

(a) Upto the date of payment of self-assessment tax, interest will be counted on the amount of unpaid advance tax.

(b) From the date of payment of self-assessment tax, interest will be levied on the unpaid amount of advance tax after deducting the self-assessment tax paid by the taxpayer.

Section 234C – Interest for default in payment of Advance Tax’s instalments

Section 234C is for levy of interest for default in payment of advance tax’s installment(s).

According to the section 208, every person whose estimated tax liability for the year exceeds INR 10,000, will pay his/her tax in advance in the form of “advance tax” by following dates:

StatusBy 15th
June
By 15th SeptemberBy 15th DecemberBy 15th
March
Taxpayers (other than those who opted for the presumptive taxation scheme of section 44AD or
section 44ADA)
Upto 15% of advance taxUpto 45% of advance taxUpto 75% of advance taxUpto 100% of advance tax
Taxpayers who opted for the presumptive taxation scheme of section 44AD or section 44ADANilNilNilUpto 100% of advance tax

Any tax paid till 31st March will be counted as advance tax. Interest u/s 234C is levied, if advance tax paid is less than required amount in any installment(s).

  • In case of taxpayers (other than those who opted for presumptive taxation scheme u/s 44AD or section 44ADA), interest shall be levied-
  • If advance tax paid on or before 15th June is less than 12% of advance tax payable
  • If advance tax paid on or before 15th  September is less than 36% of advance tax payable
  • If advance tax paid on or before 15th  December is less than 75% of advance tax payable
  • If advance tax paid on or before 15th  March is less than 100% of advance tax payable
  • In case of taxpayers who opted for the presumptive taxation scheme of Section 44AD or section 44ADA interest will be levied if the advance tax paid on or before 15th March is less than 100% of advance tax payable.

No levy of interest if shortfall in payment of advance tax is due to capital gains or winning lottery, crossword puzzle etc. – Interest u/s 234C is not levied, if, the shortfall in payment of advance tax is due to failure to estimate the amount of capital gains or income referred to in section 2(24)(ix) (like winning from lotteries, crossword puzzle, etc.) or income from a new business or section 115BBDA (i.e., dividend received from a domestic company exceeds INR 10 lacs) and the taxpayer pays the required advance tax on these income as a part of immediate following installment or till 31st  March, if no installment is pending.

Rate of interest- Interest u/s 234C for default in payment of installment(s) of advance tax is charged @ 1% /month or part of a month. The nature of interest is simple interest. In other words, the taxpayer is liable to pay simple interest @1% /month or part of a month for short payment/ non-payment of individual installment(s) of advance tax.

Period of levy of interest- Interest u/s 234C is levied for a period of three months, in case of shortfall in payment of 1st, 2nd and 3rd installment and for one month and payment of last installment.

Amount liable for interest- Interest u/s 234C is levied on the short paid amount of installment(s) of advance tax.

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