Interest Calculation of Under Section 234A, 234B And 234C of Income Tax Act, Along With Provision And Example
Applicability:- Every Assessee is required to pay advance tax whose income tax liability is ₹10000 or more.
Exception:- Resident senior citizen has not income under head of Profit & Gain from business and profession, is not required to pay advance tax. This exception is not applicable on non-resident assesse.
Advance Tax shall be calculated by estimating of current year income and arriving at after deducting Tax Deducted at Source, Tax Collected at Source and Minimum Alternative Tax. Tax paid before 31st march of previous year shall be treated as advance tax.
Due Date Amount of Advance tax
Upto 15th June of Previous Year 15% of advance tax liability
Upto 15th September of Previous Year 45% of advance tax liability
Upto 15th December of Previous Year 75% of advance tax liability
Upto 15th March of Previous Year 100% of advance tax liability
Note:- If assessee opts to Section 44AD or 44ADA for the calculation of income as per presumptive basis, advance tax shall be paid with single installment i.e. due date of advance tax in such case is 15th March of previous year.
Interest for delay return filing shall be calculated on Return of Income (ROI) after adjustment of TCS/TDS/Advance Tax/MAT/Self Assessments tax (If paid up to due date of return filing) & any relief under section 89 of Income tax Act, 1961.Interest shall be calculated @1% for per month or part of month from the next day of due date of return filing till the date of actual return filing date.
Section 234B is not applicable If assessee has paid 90% or more advance tax.
Interest on advance tax under section 234B shall be computed on short payment of advance tax as per Return of Income @ 1% per month or part of month from 1st April of Assessment Year (A.Y.) to till actual date of payment.
Note:- If any change in income due to processing of return under section 143(1) or assessment, the tax as per u/s 143(1)/assessed tax shall be taken instead of tax as per return of income (ROI) for the calculation of interest under section 234A & 234B.
Formula: Deferred amount × 1% per month or part of month × 3 month for all installment except Last installment. (for last installment – interest is applicable for 1 month only)
Note:- On interest shall be levied if assesse has paid advance tax up to 12% for 1st installment and 36% for 2nd installment.
Due date of return 30th September 2020
Due date payment of advance tax Advance tax Paid
15 june ₹40000
15 September ₹65000
15 December ₹100000
15 March ₹62000
Return filing date- 15 October 2020.
Interest u/s 234A- Return has been filed on 15 October 2020 i.e. 15 after due date for filing of return. So interest u/s 234A shall be levied @1% on income tax payable reduced by TDS/Advance Tax.
Income Tax (1050000*30%*104%) 327600
Less: – TDS 37600
– Advance tax (40000+65000+100000+62000) 267000
Interest (23000*1%) 230
Interest u/s 234B: (327600-37600)90% 261000
Advance tax (40000+65000+100000+62000) 267000
Here Advance tax has been paid more than 90% of assessed tax, so interest u/s 234B is not applicable.
Interest u/s 234C- Income tax due/ Advance tax payable (327600-37600) ₹ 290000
|Due Date||Advance tax paid cumulatively (A)||Min. tax payment for avoiding interest (B)||Min. tax payment if condition (B) is not met (C)||Short Fall (B-A)
(Negative figure ignore)
|15 June||40000||12%*290000 = 34800||15%*290000 = 43500||Nil||0|
|15 Sept||105000||36%* 290000=104400||45%* 290000 =130500||Nil||0|
|15 Dec||205000||75%* 290000 =217500||75%* 290000 =217500||12500||12500* 1%*3 =375|
|15 March||267000||100%* 290000 =290000||100%* 290000 =290000||23000||23000* 1%*1 =230|
Total Interest payable u/s 234C (375+230) = ₹605