Interest Applicable under Section 234A, 234B and 234C while Filing ITR

Every Indian citizen is responsible for paying income tax and filing tax returns. It’s a healthy habit to keep, and it also aids in the recovery of TDS payments. Your taxes provide the government with a significant source of cash, which it invests in critical public programs and services. A term plan or a life insurance plan may include tax reduction and savings measures that can help you pay less in the long run.

Tax payments can be made on time with appropriate planning. However, if you do not plan ahead of time, you risk delaying your payments. The interest rates for various sorts of defaults are mentioned in the IT (Income Tax) Act’s Sections 234A, 234B, and 234C. Let’s take a closer look at each of them.

Section 234A: Interest for defaults in furnishing return of income

Section 234A of the Income Tax Act imposes interest for late submission of an income tax return. This clause imposes interest if the taxpayer files their income tax return after the due period established by the authorities.

Rate of interest

Interest is charged at 1% every month or portion of a month under section 234A. As a result, if the taxpayer fails to file his or her income tax return on time, he or she is obliged to pay simple interest of one percent every month or portion of a month (that is because the fraction of a month is considered as a full month).

Period of levy of interest

Section 234A interest accrues from the day immediately succeeding the due date for filing the income tax return to the date of furnishing the income tax return. When no return is filed, interest begins to accrue until the assessment under Section 144 is completed.

Amount on which Interest to be levied

Interest is payable on the amount of the tax on total income as determined under section 143, and, where a regular assessment is made, on the amount of the tax on total income as determined under regular assessment, as reduced by the amount of the tax on total income as determined under regular assessment, as reduced by the amount of the tax on total income as determined under regular assessment, as reduced by the amount of the tax on total income as determined under regular assessment, as reduced by the amount of the tax on total income as determined under regular assessment, as:

• Advance tax, if any paid.
• Any tax that is deducted or collected at the point of sale.
• Any tax relief is permitted.

Section 234B: Interest for defaults in payment of advance tax

Interest is levied under section 234B of the Income Tax Act in two situations: 1) if the taxpayer has failed to pay advance tax, which he is liable to pay if his estimated tax liability for the year is Rs. 10,000 or more, and 2) if the advance tax paid by the taxpayer is less than 90% of the assessed tax, which is the amount of tax calculated under section 143(1) and, where regular assessment is made, the tax on the total income determined under such regular assessment.

Rate of interest.

Interest is charged at 1% every month or a fraction of a month under section 234B. As a result, if the taxpayer fails to pay the advance tax, he or she will be subject to simple interest at the rate of 1% every month or part of a month (that is because the fraction of a month is considered a full month).

Period of levy of interest.

Interest is charged under section 234B from the first day of the assessment year (usually April 1) to the date of the income determined under section 143(1) or when a regular assessment is made. Interest is charged on the differential amount from the first day of the assessment year until the date of assessment or re-computation if the income is increased as a result of the assessment or re-computation.

Amount on which Interest to be levied

The taxpayer is obligated to pay the following interest on the amount:

• If the taxpayer has not paid advance tax, a penalty equivalent to the assessed tax will be imposed.
• The amount by which the advance tax is paid as aforesaid falls short of the assessed tax if the advance tax paid by the taxpayer is less than 90% of the assessed tax.

Section 234C: Payment of advance tax late or interest on advance tax deferment

Interest is charged under section 234C in the following situations where different installments of advance tax are deferred:

1. Interest will be charged to taxpayers who have not chosen the presumptive taxation plan under section 44AD or section 44ADA:

• If the tax paid in advance on or before June 15th is less than 12% of the tax due on the returned income.
• If the tax paid in advance on or before September 15th is less than 36% of the tax due on the returned income.
• If the advance tax paid on or before December 15th is less than 75% of the tax due on the returned income, and (d) If the advance tax paid on or before March 15th is less than 100% of the total tax due on the returned income.

2. If the advance tax paid on or before the 15th of March is less than 100 percent of the tax owed on returned income for taxpayers who have chosen the presumptive taxation system under section 44AD or section 44ADA, interest will be charged.

Late payment interest is charged at a rate of 1% on the outstanding amount of tax, beginning on the individual dates stated above and continuing until the payment date.

Rate of interest

Interest is charged at 1% every month or portion of a month under section 234C. As a result, the taxpayer is liable to pay simple interest at 1% per month or fraction of a month if individual installments of advance tax are not paid in full (that is because the fraction of a month is considered as a full month).

Period of levy of interest

Interest is charged under section 234C for one month if the last installment is not paid on time, and for three months if the first, second, and third installments are not paid on time.

Amount on which Interest to be levied

In the event of a shortfall, the taxpayer will be required to pay interest on the amount of the deficiency in advance tax for each installment.