• Mar
  • 13
  • 2014

234ABC Interest Calculator & Brief with Examples

CA Sandeep Kanoi

Date for Advance tax is nearing and all the Assessees and their Tax Consultant must be busy in calculating advance tax payable for the Month of March. In this article we are discussing Interest payable Under Section 234A, 234B, 234C of the I.T. Act for default in furnishing return of Income , default in payment of Advance tax and for deferment of Advance tax .

Section 234A – Interest for default in furnishing return of Income

(A)  Where the return of income for any Assessment year is furnished after the due date specified in section 139(1) or is not furnished the assessee shall be liable to pay simple Interest @ 1% for every month or part of a month.

Section 139(1) specifies due dates for filing voluntary returns of a company, a person (other than a company), or any other assessee.

(B) The interest shall be payable for the period commencing from the date immediately following the due date and -

(1) Where the return is furnished after due date, ending on the date of furnishing the return; or

(2) Where no return has been furnished, ending on the date of completion of Assessment u/s 144. (Best Judge Assessment)

(C) The Interest shall be calculated on amount of tax on total income as determined u/s 143(1) or on regular assessment as reduced by the advance tax pain and any tax deducted or collected at source and relief from double taxation u/s 90, 90A or deduction from double taxation u/s 91 and amount of MAT credit allowed to be set off u/s 115JAA.

Key Note – Pay Your Tax Before the Due Date of Filing Your Return to avoid Interest U/s. 234A of the Income Tax Act, 1961.

Section 234B – Interest for defaults in payment of Advance tax 

(A) Where in any financial year, an assessee who is liable to pay advance tax u/s. 208 has failed to pay such tax or the advance tax paid by such assessee is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @ 1% for every month or part of a month.

(B) The period for which interest is payable would be the period from the first day of April next following such financial year to the date of determination of total income u/s. 143(1). However, if regular assessment u/s. 143(3) is completed, then interest is chargeble up to the date of regular assessment.

(C) The amount on which interest shall be calculated shall be the amount equal to the assessed tax or on the amount by which the advance tax paid falls short of the assessed tax.

Key Note – Pay 90% of Your Total Tax Payable after TDS on or before 31st March  to avoid Interest U/s. 234B.

Section 234C – Interest for deferment of Advance tax

(A)  In the case of companies calculation of interest u/s. 234C shall be as follows: Where the advance tax paid by the company on its current income on or before 15th June, 15th September, 15th December is less than 15%, 45% and 75% respectively on the returned income, then the company shall be liable to pay simple interest at the rate of 1% per month for a period of three months on the amount of the shortfall. However, in the case of company assessee, leverage has been provided as to the first 2 installments, falling due on 15th June & 15th September. A concessional rate of 12% and 36% has been provided as against 15% and 45% respectively. In case the companies does not pay even 12% or 36% as the case may be, interest u/s. 234C shall be levied on the entire sum of advance tax payable based on 15% and 45% for the respective installments of 15th June and 15th September.

 (B) For other assessee, the existing pattern of calculation will apply as indicated below:

Where in any financial year the assessee who is liable to pay advance tax u/s. 208 has failed to pay such tax or the advance tax paid by the assessee on his current income:-

(1) On or before 15th September is less than 30% of the tax due on the returned income;

(2) On or before 15th December is less than 60% of the tax due on the returned income, then the assessee shall be liable to pay simple interest @ 1% per month on the shortfall for a period of 3 Months on the amount of such shortfall (i.e. 3%) 

(C) Where the whole amount of advance tax paid by any assessee on or before 15th March is less than the tax due on the income returned then the assessee shall be liable to pay simple interest @ 1% on the amount of shortfall from the tax due on the returned income. This applies to companies as well as to other assessees.

(D) If the short fall in the payment of the tax due on the returned income is on account of underestimation or failure to estimate -

(1) Capital gains

(2) Winnings from lotteries, crossword puzzles, races (including horse races), card games and any other activity in the nature of gambling, betting etc.,

and if the assessee has paid the amount of tax payable in respect of the above mentioned income as part of the remaining installments of advance tax which are due or where no such installments are due, by the 31st March of the financial year, no interest shall be leviable in respect of such shortfall.

(E) “Tax due on the returned income” means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable as reduced by the amount of tax deductible or collectible at source on any income which is subject to such deduction or collection and which is taken into account in computing such total income. (Explanation to Section 234C).

Key Note – Pay 1000% of Your Total Tax Payable  before 31st March  to avoid Interest U/s. 234C.

Please Note-  As Per Rule 119A of Income Tax Rules Any fraction beyond the nearest multiple of Rs.  100/- will be ignored in the calculation of interest payable or receivable by the assessee.

Download Interest Calculator U/s 234A, 234B, 234C of the Income Tax Act, 1961 – 1

Download Interest Calculator U/s 234A, 234B, 234C of the Income Tax Act, 1961 – 2

Download Interest Calculator U/s 234A, 234B, 234C of the Income Tax Act, 1961 - 3 (By Rohit Kapoor)

Example Illustrating calculation of Interest U/s. 234A, 234B and 234C

(Republished with amendments)

Sandeep Kanoi

10 Responses to “234ABC Interest Calculator & Brief with Examples”

  1. Priyanka Jindal says:

    The question is—what happens in cases where 90 per cent of the assessed tax is paid but on the basis of the Commission’s order under s. 245D(4) the advance tax paid turns out to be less than 90 per cent of the assessed tax as defined in the Explanation to s. 234B(1) ?

    pls reply asap.

  2. rakesh kumar jain says:

    Dear Sir/Madam,

    Do Senior citizens too need to pay Advance Tax?

    Best regards, RAKESH

  3. Joshi & Shah Associates says:

    Dear Ravinderkumar Agarwal Please note that Int. u/s 234B is levied if we had not paid 90% of assessed tax and in calculation of assessed tax we already deduct TDS so if we add TDS to calculate the 90% criteria then it will mean Double benefit of TDS amount.

  4. SUBHASH YADAV says:

    U/S 234 B INTEREST IS CALCULATED ON ASSESSED TAX AND REDUCED BY ADVANCE TAX PAID. AND ADVANCE TAX PAID IS MORE THAN 90% THEN NO INTEREST IS CHARGEABLE. MY QUESTION IS “WHY NOT TDS AMOUNT IS ALSO BEING DEDUCTED FOR CALCULATING TOTAL 90% TAX HAS BEEN PAID OR NOT. THUS IF TOTAL OF ADVANCE TAX AND TDS BOTH IS MORE THAN 90% OF TOTAL TAX DUE THEN NO INTEREST U/S 234 B SHOULD BE LEVIED. CAN YOU HELP GIVING ANSWERING WITH ANY DECIDED CASE DETAIL.

    THANKS WAITIMG UR REPLY

  5. Anil Kumar says:

    I would like to know the calculation Interest u/s 234b & 234c ,for return u/s 148

  6. Harinath says:

    I am salaried employ. However a fixed deposit in bank had earned an interest of about 20000/- and the bank deducted 10%+surcharge as tax and given form-16A for the same in April/ May of the following year. But they have uploaded only some portion of total interest as interest income paid but deposited full amount deducted. The remaining 20% dues of tax on interest income as computed by me were paid without any penalty thro’ challan in July – a few days before filing returns and filed the returns before the normal due date for filing returns i.e. 31stJul as per rules. These 20% dues on interest income which were paid after end of Financial year was about only 5% of the total dues for the corresponding Financial year. Still there was a demand notice under 234B & 234C, which I could not understand and got to know of it only after 3 years as the physical demand notice/ mail was not received earlier. What could be the reason for ITO’s demand notice? Do we have to pay penalty under 243B&C even for such meager interest income which is not even 5% of total salary income?
    If it’s not so, can we say that the demand to individual tax payer is possibly due to delayed transfer of such TDS funds by employer to ITO. In such case shall we say it’s wrong application of rules by ITO for pay revision arrears received by an employee during 2nd half of financial year formed major portion of salary for that year.

  7. BIDYUTSANPUI says:

    in case of assessment year 2010-11 total tax payable1401686.advance tax of rs10000 was paid on06/01/2010.and self assment tax paid of rs214087 was paid on 09/08/2011. return submitted by efilling on31-03-2011. Pls tell me the the int u/s 234abc.and in what way.

  8. ritika says:

    i didnot file return from 2006-07 year
    now i want to file my all return what panality will charge if i have no tax able income and no refund will claim (income is less then 160000).
    reply at ritika402@gmail.com

  9. Sakthi Vadivel says:

    I have received a notice of Difference of Rs. 1600 relating to 234B Interest. I calculate using Winman Software. I don’t know the calculation method of the software. Could anyone please help me with this ?

  10. Ravinder kumar Agarwal says:

    U/S 234 B INTEREST IS CALCULATED ON ASSESSED TAX AND REDUCED BY ADVANCE TAX PAID. AND ADVANCE TAX PAID IS MORE THAN 90% THEN NO INTEREST IS CHARGEABLE. MY QUESTION IS “WHY NOT TDS AMOUNT IS ALSO BEING DEDUCTED FOR CALCULATING TOTAL 90% TAX HAS BEEN PAID OR NOT. THUS IF TOTAL OF ADVANCE TAX AND TDS BOTH IS MORE THAN 90% OF TOTAL TAX DUE THEN NO INTEREST U/S 234 B SHOULD BE LEVIED. CAN YOU HELP GIVING ANSWERING WITH ANY DECIDED CASE DETAIL.

    THANKS WAITIMG UR REPLY

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