Section 234B/C: Interest on Non-Payment/Default of Advance Tax

Interest Payable by Assesee under Section 234B/C

Interest on Non-Payment and Default in Paying Advance TaxInterest on non-payment/default of advance tax there are two sections which dealt with interest on nonpayment or default in payment of advance tax.

Section 234B: Interest ofr Default in Payment of Advance Tax

It applied in two cases:

1. No Advance Tax Paid: When assessee who is liable to pay to pay advance tax doesn’t pay advance tax at all. Then interest is chargeable 1% pm for every month or part of the month from 1st April to the date of determination on total income u/s 143(1) or where regular assessment is made to the date of such regular assessment.

2. Partial Advance Tax Paid: When assessee pays some advance tax but it is less than 90% of assessed tax then interest is chargeable 1% pm for every month or part of the month on Assessed Tax (Tax determined u/s 143(1) or on assessment u/s 143(3), 144, 147 or 153A) Less advance tax (which include TDS/TCS and relief u/s 89, 90 or 91 and relief u/s 90A and tax credit u/s 115JAA or 115JD). Interest will be charge from 1st April to the date of determination on total income u/s 143(1) or where regular assessment is made to the date of such regular assessment. For calculation of Interest part of the month shall be calculated as Full Month.

Situations:

Advance tax is paid after 1st April but before regular assessment. Then interest will be charged in two parts:

a. From 1st April to Advance tax deposit date same as per mentioned above

b. From date of deposit of advance tax, tax will be calculated on assessed tax – advance tax paid before – new deposit advance tax

In tax is increased in reassessment. Then interest will be payable @ 1% from date of assessment u/s 143(1) or regular assessment to date of reassessment. Interest will be charged on additional amount of tax.

Section 234C: Interest for Deferment in Installments of Advance Tax

It is applicable in two types

1. For Non-corporate assessee

If Advance tax is paid on or before 15 Sept is less than 30% then simple interest 1% for 3 months on payable tax*-paid tax till 15 September

If Advance tax is paid on or before 15 Dec is less than 60% then simple interest 1% for 3 months on payable tax*-paid tax till 15 September

If Advance tax is paid on or before 15 March is less than 100% then simple interest 1% on payable tax*-paid tax till 15 September

* payable tax means Tax on total income declared in return – TDS/TCS and relief u/s 90 or 91 and relief u/s 90A and tax credit u/s 115JD. For 15 Sept 30%, for 15 December 60% and for 15 March 100%

2. For corporate assessee

If Advance tax is paid on or before 15 June is less than 12% then simple interest 1% for 3 months on payable tax*-paid tax till 15 September

If Advance tax is paid on or before 15 Sept is less than 36% then simple interest 1% for 3 months on payable tax*-paid tax till 15 September

If Advance tax is paid on or before 15 Dec is less than 75% then simple interest 1% for 3 months on payable tax*-paid tax till 15 September

If Advance tax is paid on or before 15 March is less than 100% then simple interest 1% on payable tax*-paid tax till 15 September

* payable tax means Tax on total income declared in return – TDS/TCS and relief u/s 90 or 91 and relief u/s 90A and tax credit u/s 115JD. For 15 June 15%, for 15 Sept 45%, for 15 December 75% and for 15 March 100%

Point to be noted, interest u/s 234 C can’t be changed even if in assessment tax is increased. Since this interest is based on income declared by assessee in his return, even commissioner can’t increase interest u/s 234C.

Waiver/reduction of interest u/s 234 B or 234C

By the power of section 119(2)(a) the CBDT have directed vide order dt 2nd June 1994 that in case where the income arise or accrues due to order of court, statutory authority of Govt then interest u/s 234 A B C can be reduced or waived by Chief commissioner/ Director General.

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