How to calculate income tax interest u/s 234 A, 234 B and 234 C

In this we will discuss about calculation of  interest u/s 234 A, 234 B and 234 C. I will first give you a easy to understand introduction about each section followed by an example which will further clarify your concept.

So let's get started!

Interest u/s 234A - Interest for late filing of return

Interest under this section is levied at the rate of 1% per month or part of month for delay in filing of income tax return.

Let's say an Individual whose due date to file income tax return is 31st July files his retun on 5th November. Let's say the tax payable by the individual is Rs 20,000.

Calculation of interest u/s 234A will be as follows

Example:-

Tax payable:- 20,000

Delay in no of months:- 4

Interest rate:- 1%

So the interest payable would be Rs 800

Another example:-

Let's say an Individual who is a partner in an partnership firm who is liable for tax audit files his return on 5th October.

In this case the due date for such an Individual will be 30th September as the partnership firm is liable for tax audit. So the interest will be calculated at the rate of 1% for one month.

Interest u/s 234B - Interest for non payment of 90% of total tax payable

This section will only apply if the total advance tax paid by the assessee is less than 90% of the total payable by the assessee.

Example:-

Total tax liablity:- 100,000
TDS:- 20,000
Advance tax paid:- 60,000

In this case Tax liablity is 100,000
Less:- TDS                      (20,000)
                                         80,000 

90% of 80,000 is 72,000 and  here the total advance tax paid is only Rs 60,000; so interest u/s 234B will apply.

Calculation of interest u/s 234B will be as follows

In the example above 1% for every month in delay in payment after 31st March.

Let's say that with the example above the person will make the payment on 4th of April, hence the total interest u/s 234B will be

=Total tax liablity-TDS-Advance tax paid

=100,000-20,000-60,000

=20,000

Therefore interest at the rate of 1% for 1 month will be levied on Rs 20,000. Interest u/s 234B will be Rs 200.

Interest u/s 234C - Interest for delay in payment of advance tax

First lets understand the due dates for payment of advance tax.

The due dates for advance tax for Corporate assessee is:-

15%   - On or before 15th June

30%   - On or before 15th September

45%   - On or before 15th December

100% - On or before 15th March

The due dates for advance tax for Non Corporate assessee is:-

30%   - On or before 15th September

60%   - On or before 15th December

100% - On or before 15th March

In case if the % of advance tax is not in par with above mentioned percentage then interest at the rate of 1% will be levied for 3 months for advance tax payable on or before 15th June, September, December and 1 month for 15th March.

Example:-

Corporate assessee

Tax payable:- 100,000

TDS:- 20,000

Advance tax paid by assessee:-

25,000 - 15th September

22,000 - 15th December

23,000 - 15th March

72,000 - Total

In this example above advance tax payable should be as follows

24,000   - On or before 15th September

48,000   - On or before 15th December

80,000 - On or before 15th March

Due Date	Amount Payable (1)	Amount Paid (2)	(1)-(2)	Interest u/s 234C
15th September	24,000	25,000	0	0
15th December	48,000	47,000	1,000	30 ( 1% for 3 months )
15th March	80,000	72,000	8,000	80 ( 1% for 1 month )

Therefore the total interest payable u/s 234C will be Rs 120.