Ankit Gupta

Ankit GuptaInterest u/s 234A is the Interest for default for Furnishing Return of Income u/s 139(1) or 139(4) or Return filed in response to notice u/s 142(1).

1.- CONDITIONS FOR LEVY OF INTEREST u/s 234A

a) Where Return of Income (ITR) is not furnished by Assessee.

b) Where Return of Income (ITR) is furnished by assessee after Due Date of furnishing Return specified u/s 139(1).

2.- RATE OF INTEREST

>1% per month or part of month.

(Part of month means Interest for whole month is charged @1% even if the default is for 1 day)

3.- AMOUNT ON WHICH INTEREST u/s 234 A IS COMPUTED

Total Tax Liability   XXX
Less-   TDS XX
Relief u/s 89(1) XX
Relief u/s 90/91 XX
Advance Tax XX
NET TAX LIABILITY   XXX

4.- CHARACTERISTICS OF INTEREST U/S 234A

>Interest u/s 234A is mandatory in nature which can only be waived off by chief Commissioner of Income Tax (CCIT) or Direct General of Income Tax (DG).

>If the amount of self assessment tax paid by assessee fall short of the amount required to be paid u/s 140A as self assessment tax.

Then the amount so paid shall be first adjusted towards Interest and balance towards Income Tax.

5.- ILLUSTRATIONS

Suppose an individual furnish his ITR on 1st Sept.2015 and the due date of filing is 31st July,2015.

Income from salary           = Rs 3,50,000

Tax Payable by Individual = Rs 10,000

TDS deducted on salary   = Rs 2,000

Then, Interest required to be paid by such individual u/s 234A is:

Period of default                =          2 months (August/September)

Rate of Interest                   =          1%

Amount of Interest            =          (10,000-2,000)1%*2 months

=          Rs 160

(Author Can Be Reached At ankit@taxzippy.com   Web- www.taxzippy.com)

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0 responses to “How to Calculate Interest U/S 234 of Income Tax Act”

  1. Jai Prakash says:

    Dear Ankit,
    Pl.Clarify whether self assessment tax paid is to be added to advance tax while calculating the interest payable u/s 234A.

  2. Rajendran says:

    Very useful
    Thanks a lot

  3. ANKIT GUPTA says:

    Dear Sandeep

    87A relief shall be considered while computing advance tax liability

    say if advance tax liability is Rs 11000 before considering 87A , then with the application of provisions of 87A , the person is not required to pay advance tax

  4. ANKIT GUPTA says:

    Dear Raj
    I believe that Income Tax department is correct in his view

  5. Sandeep says:

    Hi, Ankit

    Kindly tell me about the applicability of section 87A of the income tax act, 1961. Which u have not taken in ur calculation.

  6. Raj says:

    Dear Ankit Gupta ji,
    due date for AY 2012-13 was 31st Aug 2012. My client had paid interest on income tax Rs. 416 u/s 234A on 23/10/2012(@ 2% of 20812)…But ITR filed after 3 months on 24/01/2013…Now department demanding interest on income tax u/s 234A Rs 1040. (for sep to jan)..is it valid?
    plz take a note of the case CIT v Dr Prannoy Roy (2009)179taxman 53 (sc)..

    Thanks

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