Sections 234A, 234B, 234C, and 234D of the Income Tax Act impose interest on taxpayers in specific circumstances. Section 234A applies when income tax returns are filed late or not filed at all, with interest charged at 1% per month from the due date until the return is filed. Section 234B is triggered when advance tax payments fall short of 90% of the assessed tax, also resulting in a 1% monthly interest charge. Section 234C applies if advance tax instalments are less than the required percentages, with varying interest rates based on the due dates and amounts paid. Section 234D imposes interest when a refund granted during summary assessment exceeds the correct refund calculated after regular assessment, charging 0.5% interest per month on the excess. These provisions are designed to ensure timely tax payments and compliance, with specific rules for cases involving re-assessment, presumptive taxation, and self-assessment. Understanding these sections helps taxpayers avoid unnecessary penalties by ensuring timely and accurate tax payments.
Q1. When is interest under Section 234A levied?
Ans: Interest under section 234A shall be levied if the Income-tax return is furnished after the due date or is not furnished.
Q2. What is the rate of interest that shall be charged under Section 234A?
Ans: Simple interest shall be charged at the rate of 1% per month or part thereof.
Q3. Which period shall be considered for interest under Section 234A if the return is furnished belatedly?
Ans: If the income-tax return is furnished after the due date specified in section 139(1), the interest shall be charged for the period commencing from the date immediately following the due date for filing of return of income and ending with the date on which the return of income is furnished.
The Circular No. 2/2015 [F.No.385/03/2015-IT(B)], dated 10-02-2015, has clarified that no interest under section 234A is chargeable on the amount of self-assessment tax paid by the assessee before the due date of filing of return of income.
Q4. Which period shall be considered for interest under Section 234A if the return is not furnished?
Ans: If the income-tax return is not furnished, interest shall be charged for the period commencing from the date immediately following the due date for filing of return of income and ending with the date on which the best judgment assessment is completed.
Q5. Which period shall be considered for interest under section 234A if the return is furnished belatedly in re-assessment?
Ans: Where return of income is required by a notice issued under section 148 (Income escaping assessment), but it is furnished after the expiry of the time allowed under such notice, the interest shall be charged for the period commencing from the day immediately following the expiry of the time allowed under the notice and ending on the date of furnishing of return.
Interest shall be charged on the amount by which the tax determined under re-assessment exceeds the tax determined as per the completed assessment.
Q6. Which period shall be considered for interest under Section 234A if the return is not furnished in re-assessment?
Ans: Where return of income is required by a notice issued under Section 148 (Income escaping assessment), but it is not furnished, the interest shall be charged for the period commencing from the day immediately following the expiry of the time allowed under the notice and ending on the date of completion of re-assessment.
Interest shall be charged on the amount by which the tax determined under re-assessment exceeds the tax determined as per the completed assessment.
Q7. Which period shall be considered for interest under Section 234A if the return is not furnished and an updated return is filed?
Ans: If the income-tax return is not furnished by the assessee and subsequently he files an updated return, interest shall be charged on the amount of self-assessment tax payable on the total income as declared in such updated return.
The interest shall be charged for the period commencing from the date immediately following the due date for filing the original return of income and ending with the date on which the updated return is furnished.
Q8. Which period shall be considered for interest under section 234A if the return is furnished and an updated return is also filed?
Ans: An assessee shall not be required to pay interest at the time of furnishing of the updated return if he has already filed the original return, revised return, or belated return for the relevant assessment year.
Q9. Whether interest under Section 234A shall be levied on the additional income tax payable under Section 140B?
Ans: No
Q10. When is interest under Section 234B levied?
Ans: Interest under Section 234B shall be levied if the assessee has the liability to pay the advance tax, but he fails to pay the same or the amount paid as advance tax is less than 90% of the ‘assessed tax’.
Q11. What is the meaning of assessed tax?
Ans: ‘Assessed tax’ means the tax on the total income determined in summary assessment or the regular assessment less TDS or TCS, MAT Credit or AMT Credit, Relief under Section 89, and Foreign Tax Credit under Sections 90, 90A or 91.
Q12. What is the rate of interest that shall be charged under Section 234B?
Ans: Simple interest shall be charged at the rate of 1% per month or part thereof.
Which amount shall be considered to calculate interest under Section 234B if advance tax is not paid?
Where the assessee has the liability to pay the advance tax, but he failed to pay the same, the interest shall be charged on the whole amount of tax computed on his total income.
Q13. Which amount shall be taken to calculate interest under Section 234B if the advance tax paid is less than 90% of the assessed tax?
Ans: Where the advance tax paid by the assessee is less than 90% of the assessed tax, the interest shall be charged on the amount of assessed tax less advance tax paid.
If tax is paid on the basis of self-assessment under Section 140A, interest will be calculated on the amount by which advance tax paid falls short of assessed tax up to the date of payment of self-assessment tax, after that interest will be calculated on the amount by which aggregate of advance tax and self-assessment tax paid under Section 140A falls short of the assessed tax.
Q14. Which period shall be considered for interest under section 234B if self-assessment tax is not paid?
Ans: If the assessee did not pay the self-assessment tax, the interest shall be charged for the period commencing from April 1 of the assessment year and ending on the date of determination of income under Section 143(1) and where a regular assessment is made to the date of such regular assessment.
However, if the return is accepted as is filed by the assessee and no addition is made during the assessment, then interest shall be charged till the date of filing of the return by the assessee.
Q15. Which period shall be considered for interest under Section 234B if self-assessment tax is paid?
Ans: If the assessee has paid the self-assessment tax, the interest under this provision shall be computed for the two periods:
a. The first period starts on April 1 of the relevant assessment year and ends on the date on which the self-assessment tax is paid.
b. The second period starts from the date on which the self-assessment tax was paid and ends on the date on which the assessment is completed (if the tax liability is increased during the assessment).
Q16. Which period shall be considered for interest under Section 234B in case of re-assessment without regular assessment?
Ans: If the assessment is made for the first time under Section 147 (Income escaping assessment), interest is payable from April 1 of the assessment year till the date of such assessment order.
Q17. Which period shall be considered for interest under Section 234B in case of re-assessment after the regular assessment?
Ans: If proceedings under Section 147 are initiated after the determination of tax under Section 143(1) (summary assessment) or Section 143(3) (scrutiny assessment), the interest shall be leviable from April 1 of the assessment year till the order of re-assessment.
The interest shall be charged on the amount of tax determined in re-assessment less the amount of tax determined in summary or scrutiny assessment.
Q18. Whether interest under Section 234B shall be levied on the amount of additional income tax payable under Section 140B?
Ans: No
Q19. What are the due dates for payment of advance tax?
Ans: The advance tax shall be payable by an assessee in 4 instalments on or before the prescribed due dates as specified in the below table:
| Due date for payment of advance tax | Advance tax to be payable |
| On or before June 15 of the previous year | At least 15% of advance tax |
| On or before September 15 of the previous year | At least 45% of advance tax |
| On or before December 15 of the previous year | At least 75% of advance tax |
| On or before March 15 of the previous year | 100% of advance tax |
| Note: Any tax paid, on or before 31st March, shall also be treated as advance tax paid during the financial year. | |
Q20. When interest under Section 234C shall be levied?
Ans: The interest under Section 234C shall be levied if payment of advance tax in an instalment is less than the prescribed percentage (given in the above table). However, the interest shall be levied if:
a. Advance tax paid on or before 15th June is less than 12% of the assessed tax.
b. Advance Tax paid on or before 15th September is less than 36% of the assessed tax.
c. Advance Tax paid on or before 15th December is less than 75% of the assessed tax.
d. Advance Tax paid on or before 15th March is less than 100% of the assessed tax.
Q21. What is the due date for payment of advance tax if the assessee has opted presumptive taxation scheme under Sections 44AD or 44ADA?
Ans: An assessee, who has opted presumptive taxation scheme of Section 44AD or Section 44ADA, can pay the whole amount of his advance tax liability on or before March 15th of the previous year. Thus he can pay the 100% of advance tax in a single instalment on or before March 15th of the previous year.
Q22. When shall interest under Section 234C be charged if the assessee has opted presumptive taxation scheme of Sections 44AD or 44ADA?
Ans: If the assessee has opted for the presumptive taxation scheme of Section 44AD or Section 44ADA, the interest under this provision shall be levied if the advance tax paid on or before 15th March of the financial year is less than 100% of the advance tax payable.
Q23. How to calculate interest under section 234C?
Ans:
| When is interest payable? | Period of interest | Amount on which interest shall be payable |
| If the advance tax paid on or before June 15 is less than 12% of the assessed tax | 3 months | 15% of assessed tax less tax deposited on or before June 15 |
| If the advance tax paid on or before September 15 is less than 36% of the assessed tax | 3 months | 45% of assessed tax less tax deposited on or before September 15 |
| If the advance tax paid on or before December 15 is less than 75% of the assessed tax | 3 months | 75% of assessed tax less tax deposited on or before December 15 |
| If the advance tax paid on or before March 15 is less than 100% of the assessed tax | 1 month | 100% of assessed tax less tax deposited on or before March 15 |
Q.24. How to calculate interest under Section 234C if the assessee has opted presumptive taxation scheme of Section 44AD or 44ADA?
Ans: If the assessee has opted presumptive taxation scheme of Sections 44AD or 44ADA and advance tax paid on or before March 15th is less than 100% of the assessed tax, simple interest at the rate of 1% shall be charged for 1 month on the shortfall amount (i.e. 100 % of assessed tax less tax deposited on or before March 15).
Q25. What are the exceptional cases where a shortfall in payment of advance tax shall be ignored for calculation of interest under section 234C?
Ans: If a shortfall in payment of tax happens on account of underestimating or failure to estimate the accrual of the following income, then such shortfall shall be ignored while determining the interest under Section 234C:
a. Gains arising from the transfer of capital assets;
b. Any winnings from lotteries, crossword puzzles, races including horse races, card games, or any other sort of gambling;
c. First-time accrual of income under head’ Profits and gains from business or profession’;
d. Dividend income.
This exception is available provided the assessee pays the whole amount of tax in respect of such income as part of the remaining instalments of advance tax which are immediately due after the accrual of such income, or if no instalment is due, then such tax is paid before the end of the financial year.
Q26. When is interest under Section 234D levied?
Ans: Where any refund is granted to an assessee on summary assessment but it is found on completion of regular assessment that no refund is due to the assessee or the amount refunded exceeds the amount refundable on regular assessment, the assessee shall become liable to pay interest under Section 234D on such amount of refund which was not actually due to him.
Q27. What is the rate of interest that shall be charged under Section 234D?
Ans: Simple interest shall be charged at the rate of 0.5% per month or part thereof.
Q28. Which amount shall be taken to calculate interest under Section 234D?
Ans: Where the amount is refunded on summary assessment, but no refund is found due on regular assessment, the interest shall be charged on the whole amount of the tax refund.
Further, if any refund is granted to the assessee after summary assessment and the refund so granted exceeds the amount refundable on regular assessment, the interest shall be charged on the such excess amount refunded to the assessee.
Q29. Which period shall be considered for interest under Section 234D?
Ans: The interest shall be charged for the period commencing from the date of grant of refund on completion of summary assessment under Section 143(1) and ending on the date on completion of regular assessment.
