Simplified the provisions of interest payable by the assessee on default of payment of income tax u/s 234A

For defaults in furnishing return of income (Sec.234A)

Rate of Interest – 1% per month or part of month (Simple Interest)

Period for which interest is payable – Commencing on the date immediately following the due date for filing the return of income and ending on –

a)      The date of furnishing the return (where return has been filed after the due date); or

b)      The date of completion of assessment under section 144 (where no return has been furnished)

Amount on which interest is payable –

a)      Find out the tax on total income as determined u/s 143(1) or on assessment u/s 143(3) or section 147 or 153(A) of the assessment is made for the first time u/s 147 or 153(A)

b)      From the tax so determined advance tax paid, tax deducted or collected at source shall be deducted

Notes : – 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. (provided the return could not be filed for reasons beyond the assessee’s control)  as in the case referred  - CIT v. Pranoy Roy (2006) 179 Taxman 53 (SC).

Here we are discussing only when filing of income tax returns not about assessment and reassessment – We will cover this aspect also but in future articles. So keep in touch and don’t forget to subscribe your email id to get latest updates directly in your email inbox

Step by Step Calculation of Interest u/s 234A

Tax on Total Income                                                                                                                       ———————

Less:

a)      Advance tax paid

b)      TDS/TCS

c)       Relief u/s 90 90A deduction u/s 91, and (if any)

d)      Set off u/s 115JAA (if any)                                                            ————-

Amount on which interest is payable                      ———————-

Interest Calculation

Amount on which interest is payable *1/100* No. of months delay

Very Important

The income tax shall be rounded off to the nearest multiple of 100 and fraction of rs. 100 shall be ignored. For example , if the tax is Rs. 1844 or Rs. 1887. It shall be rounded off to Rs. 1800/- in both the cases.  [(Rule 119A(C)]

See: Calculator of interest calculation u/s 234A, 234B, 234C (But it only works for A.Y. 2008-09)

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