How to Compute Interest Payable Under Section 234abc

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Tags: Income Tax, 234a, 234b, 234c,Analysis of section 234,interest us 234 a/b/c,  

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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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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.

---

[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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