Section 234A 234B and 234C of the Income Tax Act deals with Interest Provisions. What Sections 234ABC is exclusive of each other. Section 234A deals with not filing Return of Income with the Income Tax Department. Section 234B deals with Interest on Non-payment of Advance Tax. The detailed analysis of all these three provision is explained below.
Section 234A of Income Tax Act
Section 234A brings in Interest for late filing of Return of Income. The rate of interest is 1% on the tax liability for each month.
Mr.Ravi has a tax payable of Rs.5,00,000. The Due date for filing his Return of Income is 31st July 2016. However, he filed his Income Tax Return only on 18th November, 2016.
So, as the delay is for a period of 4 months, Interest will be calculated for all four months at 1% on the tax liability i.e., Rs.5,00,000.
Interest Payable under section 234A = Rs. 20,000 (Rs.5,00,000*1%*4/12)
Section 234B of Income Tax Act
Section 234B contains the Interest provisions for Interest for non-payment or short-payment of Advance tax.
Interest under section 234B is attracted for non-payment of advance tax or payment of advance tax of an amount less than 90% of assessed tax.
Section 234B Interest Liability
The interest liability would be 1% per month or part of the month from 1st April following the financial year upto the date of determination of income under section 143(1).
Such interest is calculated on the amount of difference between the assessed tax and the advance tax paid. The Assessed tax is the tax calculated on total income less tax deducted at source
Section 234C of Income Tax Act
This Section deals with Interest payable for deferment of Advance tax (Don’t get confused between Section 234B and 234C). Interest under section 234C is attracted for deferment of advance tax beyond the due dates.
Interest Liability u/s 234C
The interest liability would be 1% per month, for a period of 3 months, for every deferment. However, for the last installment of 15th March, the interest liability under this section would be 1% for one month.
Interest Calculation u/s 234C
The interest is to be calculated on the difference between the amount arrived at by applying the specified percentage of tax on returned income and the actual amount paid by the due date.
Instalments of advance tax and due dates
|Due Date||Amount Payable|
|On or before the 15th June||At least 15% of Advance tax liability calcualted|
|On or before the 15th September||Not less than 45% of advance tax liability, as reduced by the amount, if any, paid in the earlier installment.|
|On or before the 15th December||Atleast 75% of advance tax liability computed, (minus) amounts paid in the earlier installment or installments.|
|On or before the 15th March||The whole amount of advance tax liability as reduced by the amount or amounts, if any, paid in the earlier payment instalments.|