Analysis of section 234 by Nishu Tulsawat

Friends, before we start section 234, some of the relevant sections are need to be discussed which are connected to section 234.

As per section 207(1), every person shall estimate his/her tax liability and pay it in advance to the Government.
& FURTHER w.e.f. 1-4-2012, as per section 207(2), a senior citizen who has no income from business or profession will not be required to pay any Advance Tax.

As per section 208 advance tax should be paid only if tax payable is Rs. 10,000 or more. In other words if tax payable so estimated is less than Rs. 10,000 then assessee will not be required to pay any Advance Tax.

As per section 211, the manner of advance tax payment for a company assessee & any other assessee are as follows:-

For Company

Up to 15^th June of previous year-----------------15% of Tax Payable

Up to 15^th September of previous year-------45% of Tax Payable

Up to 15^th DECEMBER of previous year--------75% of Tax Payable

Up to 15^th MARCH of previous year-------------100% of Tax Payable

For Any Other Assessee

Up to 15^th September of previous year------30% of Tax Payable

Up to 15^th DECEMBER of previous year--------60% of Tax Payable

Up to 15^th MARCH of previous year------------100% of Tax Payable

Section 234(c) [Very very very simple]

If any person has defaulted in payment of advance tax according to the provisions of section 211(discussed above) then such person has to pay interest u/s 234(c) @ 1% per month for a period of 3 months on the amount of the shortfall. But for the last instalment interest has to be paid only for 1 month.

Special relaxation to a company assessee:- if the advance tax paid by the company on its current income on or before the 15th day of June or the 15th day of September, is not less than 12 % or, as the case may be, 36 % of the tax due on the returned income, then, it shall not be liable to pay any interest on the amount of the shortfall on those dates.

Company assessee

Example:- M/S  XYZ PVT.LTD. GIVES THE FOLLOWING DETAILS:-    
TAX ON TOTAL INCOME   - RS. 10,00,000
TDS – RS. 2,00,000

Advance tax payments:-

Up to 15^th June --------rs. 80,000

Up to 15^th September------rs. 2,40,000

Up to 15^th DECEMBER --------rs. 4,00,000

Up to 15^th MARCH --------rs. 5,25,000

Calculate interest u/s 234(c).

SOLUTION:-

	Total Tax	10,00,000.00
	less:-TDS	2,00,000.00
	Assessed tax	8,00,000.00
Due dates	%	Tax payable	Tax paid	Shortfall	Interest
15th June	12%	96,000.00	80,000.00	16,000.00	480.00
15th sept.	36%	2,88,000.00	2,40,000.00	48,000.00	1,440.00
15th dec.	75%	6,00,000.00	4,00,000.00	2,00,000.00	6,000.00
15th march	100%	8,00,000.00	5,25,000.00	2,75,000.00	2,750.00
TOTAL INTEREST U/S 234(C)					10,670.00

Interest calculation
6,000  X  1% X 3 MONTHS = RS. 480
48,000  X  1% X 3 MONTHS = RS. 1440
2,00,000  X  1% X 3 MONTHS = RS. 6000
2,75,000  X  1% X 1 MONTHS = RS. 2750

Individual or any other assessee

Example:- MR. X  GIVES THE FOLLOWING DETAILS:-    
TAX ON TOTAL INCOME   - RS. 10,00,000
TDS – RS. 2,00,000

Advance tax payments:-

Up to 15^th September------rs. 2,30,000

Up to 15^th DECEMBER --------rs. 4,00,000

Up to 15^th MARCH --------rs. 5,25,000

Calculate interest u/s 234(c).

Solution:-

	Total Tax	10,00,000.00
	Less:-TDS	2,00,000.00
	Assessed tax	8,00,000.00
Due dates	%	Tax payable	Tax paid	Shortfall	Interest
15th Sept.	30%	2,40,000.00	2,30,000.00	10,000.00	300.00
15th Dec.	60%	4,80,000.00	4,00,000.00	80,000.00	2,400.00
15th March	100%	8,00,000.00	5,25,000.00	2,75,000.00	2,750.00
Total interest u/s 234(c)					5,450.00

Interest calculation
10,000 X 1% X 3 MONTHS = RS. 300
80,000 X 1% X 3 MONTHS = RS. 2400
2,75,000 X 1% X 1 MONTHS = RS. 2750

Section 234B (very very simple)

If the assessee is liable to pay advance tax as per section  207 & 208 and he fails to pay advance tax up to last date of relevant previous year then he shall be liable to pay interest u/s 234 (b) @ 1% per month or part of a month. Interest shall be charged on the total amount of assessed tax from 1st April of assessment year up to the date of payment of income tax. 

OR

If the assessee is liable to pay advance tax, and he has paid advance tax but the advance tax paid by him is less than the 90% of the assessed tax then also section 234(b) will be attracted  and assessee is liable to pay interest @1% per month or part of a month on the amount of shortfall  from 1st April of assessment year up to the date of payment of income tax.   

Further “Assessed Tax” means =    Total tax liability – TDS

Example:- M/S  XYZ PVT.LTD. GIVES THE FOLLOWING DETAILS:-    
TAX ON TOTAL INCOME   - RS. 10,00,000
TDS – RS. 2,00,000

Advance tax payments:-

Up to 15^th June --------rs. 80,000

Up to 15^th September------rs. 2,40,000

Up to 15^th DECEMBER --------rs. 4,00,000

Up to 15^th MARCH --------rs. 5,25,000

Calculate interest u/s 234(b). Assume that balance tax paid by the company on 30^th Sep of next assessment year.

Total Tax	10,00,000.00
less:-TDS	2,00,000.00
Assessed tax	8,00,000.00

Solution:-

90%of assessed tax	(90% x 800000) =	7,20,000.00
Less:- advance tax paid                            =		5,25,000.00
Shortfall		1,95,000.00

Interest u/s 234(b) from 1st April to 30th sep. Of assessment year
(195000 x 1 % x 6 months)        =	11,700.00

Section 234 A (very very very very simple)

If the assessee has failed to file his income tax return on time i.e. if the assessee has paid income tax after the last date of filing the return of income tax then he is liable to pay interest @ 1% per month or part of a month. Interest shall be charged for the period subsequent to the date of filing income tax return.

Note:- As per section 139(1)

a.      A company and any other person whose accounts are required to get audited----last date of filing the return of income is 30^th Sep. of assessment year.

b.     For any other assessee----last date of filing the return of income is 31^st July of assessment year.

Example
M/S  XYZ PVT.LTD filed its return on 29^th December , and the due date prescribed under the act is 30^th Sep and the tax liability of the company is
Rs. 9,00,000. Calculate interest u/s 234(a).

Solution;-

Tax liability = Rs. 9,00,000

Delay in furnishing the return = 3 months i.e. October, November & December. Hence interest u/s 234 (a) is

Rs. 9,00,000 X 1% X 3 = RS. 27,000

Friends, I tried my best to make you understand the provisions of section 234.

Special thanks to Miss Avni Aggarwal for editing.

I hope you found this article useful.
If you have any query specifically related to this article you may contact me at nishu.saa@gmail.com.

                           Thanking you............    

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