File your ITR Hassle-Free and Maximise your Refunds
Trusted by 1 Million+ Users
4.8 Star User Rating
Authorized by Tax Department
Failed to pay taxes on time? You can pay taxes now, but interest on delay in payment of taxes is required to be paid. There are three sections governing interest on delay of payment of taxes.
In this blog we will discuss interest u/s 234A, 234B and 234C of Income Tax Act, 1961.The brief of the three sections is as below:
| Section 234 A | Delay in filing the return of income |
| Section 234 B | Non-payment or short payment of advance tax |
| Section 234 C | Non-payment or short payment of individual installment or installments of advance tax (i.e., deferment of advance tax) |
But before we discuss the provisions of section 234 A/B/C, it's important to understand the provisions of Rule 119A relating to computation of interest under the Act. The interest is to be computed in the following manner:
To understand it even more properly let's take an example. Suppose you have to compute interest on Rs. 5,455/- for 2 months and 7 days, as per rules, ?55 shall be ignored and 7 day period shall be taken as 1 month. Therefore, your interest would be calculated on Rs. 5,400 for 3 months.
Interest u/s 234A for delay in filing the return of income:
| Interest u/s 234A is payable if you file your income tax return after the due date specified. | Interest will be levied at 1% per month or part of a month from the period starting on the date immediately following the due date of filing the return and ending on the date of actually filing the return. In case, you have not filed any return, then the end date would be the date of completion of the assessment by the Department. |
For example, your tax liability for the financial year 2017-18 amounts to Rs. 9,500, the due date of filing the return of income is 31.07.2018 and you file your return on 30.08.2018, then you will be liable to pay interest of Rs. 95 (i.e. Interest @ 1% on Rs. 9,500 for 1 month) u/s 234A.
Interest u/s 234B for default in payment of advance tax:
| Interest as per section 234B is payable, if you fail to pay advance tax or if you pay advance tax which is less than 90% of your total tax liability. | Interest will be levied at 1% per month or part of a month, from 1st April till the date of actual determination of income. The amount on which interest shall be charged will be the amount of unpaid / short paid advance tax (i.e. Total assessed tax advance tax paid – TDS etc). |
For example, your tax liability for the financial year 2017-18 amounts to Rs. 55,500 and you have paid an advance tax of Rs. 50,000 (which is more than 90% of the total tax), then no interest u/s 234B shall be levied on you.
Interest u/s 234C for default in payment of installment(s) of advance tax:
Below discussed are the conditions when interest u/s 234C is levied.
| Condition | Interest Calculation |
| 1. Advance tax paid is less than 12% of Tax due on returned income on or before 15th June. | On difference between 15% of Tax due on returned income and advance tax paid till 15th June will be considered |
| 2. Advance tax paid is less than 36% of Tax due on returned income on or before 15th September. | On difference between 45% of Tax due on returned income and advance tax paid till 15 th September will be considered. |
| 3. Advance tax paid is less than 75% of Tax due on returned income on or before 15 th December. | On difference between 75% of Tax due on returned income and advance tax paid till 15 th December will be considered. |
| 4. Advance tax paid is less than 100% of Tax due on returned income on or before 15 th March. | On difference between 100% of Tax due on returned income and advance tax paid till 15 th March will be considered. |
Interest shall be levied at 1% per month or part of a month for a period of 3 months in cases (a), (b) and (c) above and for 1 month in case (d) above.
Now, suppose you have to file your return on 10.12.2018 against the due date of 31.07.2018. Your tax liability is Rs. 30,000/- out of which Rs. 25,000 has been paid as advance tax by you.
The advance tax paid is paid as follows:
| Rs. 5,000 | before 15 th June |
| Rs. 10,000 | before 15 th September |
| Rs. 25,000 | before 15 th December |
Interest shall be calculated as under:
| U/s 234A | @ 1% for 5 months on Rs. 5,000 (Rs. 30,000 - Rs. 25,000) which shall come to Rs. 250/- |
| U/s 234B |
@ 1% for 9 months (i.e. from 1 st April to 10 th December) on Rs. 5000 which shall come to Rs. 450/-. It is important to note here that if the advance tax paid was more than Rs. 27,000/- i.e. more than 90% of the total tax, no interest would have been payable. |
| U/s 234C |
Let's suppose that the balance income tax of Rs. 5000 was also paid by 15 th March. Therefore, the interest is payable only on the second installment as the amount of Rs. 10,000 is less than 36% i.e. Rs. 10,800. The amount of interest shall be Rs. 105 u/s 234 C {i.e. 1% interest on Rs. 3500(13,500-10,000) for 3 months}. |
We hope after reading you are more aware about sec 234 A/B/C. We request you to file your ITR within the due date provided so that no interest is demanded from you. But in case, if you are liable to pay interest under the above mentioned sections, we are confident that you'll calculate them correctly. For any further assistance, You can also get in our touch with our eCAs for real-time tax expert advice.
