Calculation of interest under Section 234 A, B and C of the Income Tax Act

If someone files his income tax return after the due date, he shall be liable to pay penal interest as per section 234 of the Income Tax Act. In such cases calculation of interest is something which all should know.

Due dates for filing of returns:

1. For non-corporate bodies such as individuals, HUFs, Co-operative societies and authorities whose accounts need to be audited, the due date of filing a return is 30th September.

2. For salary holders and other non-corporate assessees whose accounts need not be audited, the due date of filing a return is 31st July.

However if an assessee fails to file his return within the stipulated time applicable to him, the question of penalty comes into play.

Penalty under section 234A of the Income Tax Act:

If an assesee files a return after the due date, he shall be liable to pay penalty under section 234A of the Income Tax Act. For default in furnishing of income tax, return simple interest at the rate of 1% for every month from the due date of filing of the return up to the date of furnishing of the same and in case the return is not filed, it is up to the date of completion of the assessment procedure as per the provisions of section 144 of the Act.

The interest is calculated on the amount of the tax payable on the total income which is assessed as determined under section 143(1) or on regular assessment as per section 143(3) as reduced by the advance tax if it is paid and any TDS if deducted.

Penalty under section 234B of the Income Tax Act:

In case of shortfall in payment of advance tax that is more than 10%, an assessee is liable to pay simple interest at the rate of 1% for a month or its part thereof with effect from 1st April of the Assessment Year up to the date of determination of income as per section 143(1) of the Act or regular assessment as per section 143(3) on the amount of tax which is assessed.

‘‘Assessed tax’’ refers to the tax on the total income which is determined as per section 143(1) or on regular assessment as per 143(3) as reduced by the amount of TDS or TCS.

Penalty under section 234C of the Income Tax Act:

In case of deferment of advance tax interest is payable at the rate of 1% for 3 months on the amount of shortfall in payment of advance tax which is due. In case of salaried employees, the advance tax liability is calculated based on the income other than their salary income. The TDS deducted by the employer should not be adjusted with this amount.

But generally, no interest is imposed if the short fall in payment of advance tax is due to under estimation or failure in estimation of the amount of capital gains or any income earned by means of lotteries, races, etc. including an entertainment program on any media where there is a competition and the assessee has paid the tax on such income.