Calculation of interest u/s 234a, 234b & 234c

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Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2012 While calculating interest U/S 234A, 234B & 234C, Shall we Consider Self assessment tax Paid U/S 140A? And If it is to be considered then how the calculations will be made?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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08 December 2012 Self assessment tax will be considered only for computing interest us/ 234A and that too if it has been paid BEFORE the due date of filing the return.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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08 December 2012 Agree with Mr. Siddhartha..

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Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2012 Will it not be considered while calculating interest U/S 234B?
And as per V.K singhania's book it is considered and I am not understanding that calculation.
Plz Help.

Querist : Anonymous

Querist : Anonymous (Querist)

08 December 2012 And how the calculations will be made?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 Yes, while calculating interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961, self-assessment tax paid under section 140A should be considered. Here's how it works for each section:

### Section 234A - Interest for Late Filing of Return
Section 234A deals with interest for the delay in filing income tax return. The interest is calculated at 1% simple interest per month or part of a month on the amount of tax payable after the due date of filing the return. It is calculated from the due date of filing the return (usually July 31) to the actual date of filing.

**Consideration of Self-Assessment Tax (SAT):**
- If self-assessment tax is paid before the due date of filing the return (before July 31), it reduces the amount of tax payable.
- Interest under section 234A is calculated on the remaining tax payable after deducting the self-assessment tax.

**Example:**
Suppose the total tax payable after deducting TDS is Rs. 1,00,000. Self-assessment tax of Rs. 20,000 is paid before July 31. The remaining tax payable is Rs. 80,000.
- If the return is filed late, interest under section 234A will be calculated on Rs. 80,000.

### Section 234B - Interest for Non-Payment of Advance Tax
Section 234B applies when advance tax has not been paid or is less than 90% of the assessed tax. It mandates interest at 1% per month or part of a month on the amount of shortfall from the required payment of advance tax.

**Consideration of SAT:**
- If self-assessment tax is paid before the end of the financial year (March 31), it is treated as advance tax paid.
- Interest under section 234B is calculated on the shortfall amount (90% of assessed tax minus advance tax paid).

**Example:**
If the assessed tax is Rs. 5,00,000 and 90% of it is Rs. 4,50,000. Suppose Rs. 3,50,000 is paid as advance tax, and Rs. 50,000 is paid as self-assessment tax before March 31.
- Interest under section 234B will be calculated on Rs. 1,00,000 (shortfall amount after considering self-assessment tax).

### Section 234C - Interest for Default in Payment of Advance Tax
Section 234C applies when there is a delay or default in payment of advance tax in quarterly installments. It prescribes interest for deferment or default in payment of any installment of advance tax.

**Consideration of SAT:**
- Self-assessment tax paid before March 31 is considered as advance tax paid for the respective quarter.
- Interest under section 234C is calculated based on the shortfall or deferment of each installment of advance tax.

**Example:**
If the advance tax installment due dates are September 15, December 15, and March 15, and if any installment is paid late or not paid at all, interest under section 234C applies on the underpaid amount for the respective quarter.

### Conclusion:
In all cases (234A, 234B, and 234C), self-assessment tax paid under section 140A is considered as tax paid before the end of the financial year. This reduces the tax payable and consequently affects the interest calculation under these sections. It's important to ensure that self-assessment tax payments are made timely to minimize interest liabilities under these provisions.