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Home > Articles > Income Tax > Interest u/s 234A, 234B and 234C

Interest u/s 234A, 234B and 234C

T ony John on 08 October 2012

Income tax act is the charging statute of

income tax in India.

The Act inter alia requires that Income tax

returns be filed in time, advance tax be paid

correctly and within the time prescribed

under the act. In case the assessee fails to

comply with the provisions of the Act,

interest shall be chargeable under Sections

234A, 234B and 234C.

This article aims to give clarity on the

computation of Interest under the above

mentioned sections.

Interest under section 234A Default in furnishing the return of Income:

If the assessee has not filed his return of income within the time limit prescribed, he shall pay

simple interest @ 1% for every month or part of a month. It is calculated from the due date

to date of furnishing the return.

Example:

A company files its return on 10th December. Due date under the Act is 30th September.

Suppose the tax payable by the company is Rs.100000. Interest will be calculated as follows:

Tax = 100000

Delay = 3 months ie Oct, Nov, Dec.

Interest = 100000*3%= Rs.3000

Interest under section 234B- Default in payment of Advance Tax:

If an assessee has to pay advance tax and he has not paid such tax or if the advance tax

paid by him is less than 90% of the assessed tax, he shall pay simple interest @ 1% every

month or part of a month.

It is calculated from April 1st of the next financial year to date of determination of total

income under Section 143(1). But, if regular assessment u/s. 143(3) is completed, then

interest is chargeable up to the date of regular assessment.

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Interest shall be calculated on the amount equal to the assessed tax in case no advance tax

is paid, or on the amount by which the advance tax paid falls short of the assessed tax.

Example:

Mr. A has a tax liability of Rs.300000. TDS = Rs.50000

Advance tax payment details are as follows:

15th Sept 2011 Rs.30000

15th Dec 2011Rs.50000

15th Mar 2012 Rs.55000

Total Rs.135000

Interest u/s 234B is calculated as follows:

Tax on income Rs.300000

Less: TDS Rs.50000

Assessed tax Rs.250000

90% of assessed tax = 250000*90% = 225000

But Advance tax paid = Rs.135000

Hence 234B is attracted.

Shortfall = 250000-135000= Rs.115000

(Shortfall means difference between assessed tax and advance tax paid).

Interest under section 234 B = 115000*1%*4 months (Apr-July) = Rs.4600

Interest under section 234C Deferment of Advance tax

Before we talk about Section 234C, we need to talk about the due dates of payment of

advance tax.

Non-corporate assessee:

Due date of Instalment Amount payable

On or before the 15th September 30% of such advance tax.

On or before the 15th December 60% of total advance tax.

On or before the 15th March 100% of total advance tax

Corporate assessee:

Due date of Instalment Amount payable

On or before 15th June 15% of such advance tax

On or before the 15th September 45% of total advance tax

On or before the 15th December 75% of total advance tax

On or before the 15th March 100% of total advance tax

Section 234C is very simple.

If the advance tax paid is in underestimated instalments or if it s not paid at all, Section

234C gets attracted.

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Interest is calculated on the difference between the instalment paid and instalment payable.

This is how interest is calculated:

1% p.m. for a period of 3 months for every deferment.

But, for last instalment on 15th March, interest would be 1% for 1 month only.

Example:

Mr. A gives the following details:

Tax on total income = Rs. 500000

TDS = Rs.50000

Payment of advance tax:

15 Sept 2011 Rs.75000

12 Dec 2011 Rs.125000

15 Mar 2012 Rs. 200000

Total Rs. 400000

Solution:

Tax = Rs. 500000

TDS = Rs.50000

Assessed tax Rs.450000

Interest is computed as under:

DUE

DATEAMOUNT PAYABLE

AMOUNT

PAIDDIFFERENCE INTEREST CHARGED

14

Sept

30% of 4,50,000 =

13500075000 60000 60,000*1%*3months = 1800

12

Dec

60% of 4,50,000 =

270000200000 70,000 70,000*1%*3months = 2100

15 Mar

100% of 4,50,000 =

450000400000 50000 50000*1%*1month = 500

TOTAL INTEREST U/S 234C Rs. 4400

I hope you found the article informative and had a good time reading it. Please do post your

comments.

Regards

Tony John

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Anpayani Gupta Wrote on 27 May 2014

kishore kumar Wrote on 17 May 2014

Pragnesh Wrote on 10 May 2014

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excellent explanation! especially of section-234C.Great job.

great explaination and made it in facile way . thank u very much for ur

sincere time allocation

thanx very good aritcle in simplified manner

Show more Comments

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