How to Calculate Interest U/S 234 of Income Tax Act
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Ankit Gupta
Interest 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)
Dear Ankit,
Pl.Clarify whether self assessment tax paid is to be added to advance tax while calculating the interest payable u/s 234A.
Very useful
Thanks a lot
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
Dear Raj
I believe that Income Tax department is correct in his view
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.
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