Interest U/S 234A, 234B 234C

INTEREST U/S 234A: If a return of income is furnished after the due date or is not furnished, the assessee is liable to pay simple interest @1% P.M. or part of a month[1] on the amount of tax payable from due date till the date of filling of return, that means if the annual income tax return not filled within the stipulated time period {i.e. 30^th September for 2012-13 relevant previous year} than interest charged from the mandatory and statutory due date for filling of return till the actual date of filling of return.

IMPORTANT NOTES U/S 234A:

1.        SELF–ASSESSMENT TAX PAID BEFORE THE DUE DATE AND RETURN SUBMITTED AFTER DUE DATE: Interest would not be payable in a case where tax has been deposited prior to due date of filing of Income Tax Return even if the return of income is filed after the due date of furnishing such return.

2.       WHEN ASSESSMENT IS MADE FOR THE FIRST TIME U/S 147: A belated return cannot be submitted after the expiry of one year from the end of the assessment year. If an assessment is made for the first time u/s 147, then the assessee cannot be made liable to pay interest for the period during which it was not possible on the part of the assessee to file return till issuance of notice u/s 148.

3.       INTEREST IN THE CASE OF REASSESSMENT {SECTION 234A (3)}: If return of income is not submitted or submitted belatedly in the course of reassessment proceedings. Interest in such a case is payable by the assessee @1% P.M. for the period of default. The period of default commences on the date immediately following the expiry of time given by notice u/s 148 or 153A and ends on the date of furnishing of return (or on the date of completion of reassessment u/s 147 or 153A where no return has been furnished). Interest is payable on the amount by which the tax on the total income as reassessed exceeds the tax on the total income determined on the basis of the earlier assessment.

INTEREST U/S 234B: Under this section interest is payable as follows:

When Interest is Payable	Amount on which interest is payable	Rate of Interest	Period for which interest is payable
Assessee was liable to advance tax but has not paid.	Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M. or part of month.	1st day of the relevant assessment year till the date of determination of total income u/s 143 (1) or where regular assessment u/s 143 (3) is made to the date of such regular assessment.
Assessee has paid advance tax but it is less than 90% of the amount payable	Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax already paid or deposited or deducted	Simple Interest @1% P.M. or part of month.	1st day of the relevant assessment year till the date of determination of total income u/s 143 (1) or where regular assessment u/s 143 (3) is made to the date of such regular assessment.

Note: If an assessee has paid or deposited advance tax more than 90% of the tax payable {90% includes advance tax + tax deducted at source} than no interest will be charged.

INTEREST U/S 234C: Under this section interest is payable if advance tax is not payable in time. Calculation of interest payable is as follows:

For Non-Corporate Assessee {Section 234C (1) (b)}:

When interest is payable	Rate of Interest	Period of Interest	Amount on which interest is payable
If advance tax paid on or before 15th September is less than 30% of Assessed Tax (Tax Assessed – TDS/TCS)	Simple interest @1% P.M.	3 months	30% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th September.
If advance tax paid on or before 15th December is less than 60% of Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M.	3 months	60% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th December.
If advance tax paid on or before 15th March is less than 100% of Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M.	1 month	100% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th March.

For Corporate Assessee {Section 234C (1) (a)}:

When interest is payable	Rate of Interest	Period of Interest	Amount on which interest is payable
If advance tax paid on or before 15th June is less than 12% of Assessed Tax (Tax Assessed – TDS/TCS)	Simple interest @1% P.M.	3 months	15% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th June.
If advance tax paid on or before 15th September is less than 36% of Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M.	3 months	45% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th September.
If advance tax paid on or before 15th December is less than 75% of Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M.	3 months	75% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th December.
If advance tax paid on or before 15th March is less than 100% of Assessed Tax {Assessed Tax – TDS/TCS}	Simple Interest @1% P.M.	1 month	100% of Assessed Tax {Assessed Tax – TDS/TCS} – Advance Tax paid till 15th March.

INTEREST U/S 244A: Interest is receivable by the assessee on excess amount of Income Tax paid {Income Tax Refund}, @ 0.50% P.M. or part of month thereof, from the first day of the assessment year till the date of grant of the refund.

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[1]If payment made on 1^st May than the rate of interest must be charged @ 2% i.e. for two months even though on delay for one day only i.e. on 1^st May the rate of interest charged for two months instead of one month. That is called part of a month.

This Article has been posted by CA Prashant Doshi. He Can be reached at prashantdoshi22@gmail.com

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