Intt on Intt for delayed deposit of Income tax

This query is : Resolved

varun gupta (Querist)
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20 May 2009 A company does not pay advance tax in time and at year end pays the whole amt in single payment and calculates the intt due for delayed deposit and makes appropriate provision for same. The tax due has been deposited but the intt amt has not been deposited yet. Now, will there be calculated Intt on Intt due to be deposited or there is no such requirement under IT rules?

C.A.Javid Patel

C.A.Javid Patel (Expert)
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20 May 2009 no there is no requirement

varun gupta

varun gupta (Querist)
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21 May 2009 So, there will not be any Interest liability for the unpaid Interest amt or it can be claimed by assessing order later on?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Under the Income Tax Act, if a company does not pay its advance tax in time and subsequently makes a lump sum payment at the end of the financial year, it is liable to pay interest for the delay in payment of advance tax. This interest is calculated under Section 234B and Section 234C.

### Interest on Delayed Payment of Advance Tax:

1. **Section 234B**: This section pertains to interest for default in payment of advance tax. It applies if the advance tax paid is less than 90% of the assessed tax (100% for companies in the last year of their existence). Interest under this section is charged at 1% per month or part of the month from April 1 of the assessment year till the date of payment of the tax.

2. **Section 234C**: This section deals with interest for deferment of advance tax. It applies if there is a shortfall in the payment of advance tax in the quarterly instalments. Interest is charged at 1% per month or part of the month for the period of default.

### Interest on Interest:

- **Interest on Interest**: The Income Tax Act does not provide for interest on the interest amount due for delayed payment of advance tax. Therefore, if the interest amount for the delayed payment of advance tax has not been deposited yet, there will not be additional interest (interest on interest) on the unpaid interest amount.

- **Liability**: While there is no provision for interest on interest, the company should ensure that the interest due is paid promptly. If the interest on advance tax is not paid, it could attract penalties or be treated as an outstanding liability, which may be addressed during an assessment or scrutiny.

- **Claim in Assessment**: If the interest on the delayed payment of advance tax is not paid, it may still be claimed during an assessment or audit, but the assessing officer may impose penalties or additional interest if deemed fit.

To summarize, while there is no specific provision for interest on unpaid interest under the Income Tax rules, it is important to clear the pending interest to avoid potential issues during assessment.