Patricia (C.S.- Professional) (sdd) (197 Points)
11 October 2010Hi !! I am studying this concept of calculating interest again & again !! but unable to identify where 234b /234c interest liability will arise and unable to understand it properly. Pl help !! Also, when liability under both will arise. Pl compare and contrast b./w both ?
Thanks & regards,
Neha Sharma
sudhakar ca cwa
(service)
(1518 Points)
Replied 11 October 2010
234B- Fail to pay the Tax befor 31st March. This caluclation starts from 1st Apr to payment date. caluclation is based on tax payable - advance tax
234C- Fails to pay the Advance Tax. This start from respective advance tax dates.
caluclation is based on share in tax for the advance tax date - actual advance tax paid
C.A. LINESH PATIL
(CA)
(910 Points)
Replied 11 October 2010
section 234B applicable in case of failure of payment of Advance tax and interest calculation starts from 1st from succeeding PY till the actual payment.interest will be calculated on the difference between actual tax was liable to pay actual advance tax paid.
while section 234C applicable when there is a deferment of advance tax beyond the due dates( say like this by 15th june you were liable to pay 5000 but you paid only 4000 then interest will be calculated at the rates 1% for 3month & this step is repeated for every quarter).this is calculated quarter wise.interest liability would be 1% per month for a period of three month however for last month 1% for one month.
and interest is calculated on the amount of difference between the advance tax payable up to the date and actual advance tax paid.this calculation is made for every quarter.
say actual income was 100000
then on the basis of this income find actual advance tax was liable to pay and then check how much you paid quarter wise.
and if suppose you were liable to pay 30000 while you paid only 25000 then interest up to 31st march shall be calculated on quarter wise difference paid and after that section 234B will be applicable for 5000 from 1st April till the actual payment.
i hope you would have understood if you dont then let me know i would try to explain by producing a example.
Kamlesh
(Accountant)
(40 Points)
Replied 12 October 2010
If the 90% of the Tax liability is not paid by Advance Tax or TDS (all combine), then only the Interest u/s.234 B will come. And it has to be calculated @ 1% from the month of april to the return filing date.
234C will be same as mention by Mr.Linesh
INTEREST U/S - 234A / 234B / 234C
[I] Interest U/S 234A:
PART – A: Delay/Default in furnishing ROI within the due date given Sec. 139(1):
Rate : Simple Interest @ 1% p.m. or a part of a month.
From : The date immediately after the due date of the filing ROI.
Till : i) if ROI is filed, then till the date of filing the ROI.
ii) if ROI is not filed, then till the date of completion of Best Judgement Assessment U/S 144.
On what Amount: On the amount of tax determined U/S 143(1) or in a Regular
Assessment less (DTAA relief + MAT Credit + TDS + TCS +
Advance Tax)
PART – B: Delay/Default in furnishing a fresh ROI in response to a notice U/S 148
or U/S 153A, within the time allowed in such notice:
Rate : Simple Interest @ 1% p.m. or a part of a month
From : The date immediately after the expiry of time limit given in a notice u/s. 148 or u/s. 153A.
Till : i) If fresh ROI if filed then up to the date of filing such ROI
ii) If ROI is not filed then till the date of completion of Re-Assessment or Recomputation U/S 147 or U/S 153A.
On what Amount: On the amount of Tax on income determined in a Reassessment / Recomputation U/S 147 or U/S 153A Less (Tax on income determined in an earlier proceedings)
Points to be noted about Interest U/S 234A:
If the amount of tax, on which interest U/S 234A is calculated is increased or decreased by way of –
a) a Rectificational order U/S 154 or U/S 155
b) an Appeallate order U/S 250/254/260/262.
c) a Revissional order of CIT U/S 263/264
d) an order of Income Tax Settlement Commission (ITSC) U/S 245D
then, the amount of interest U/S 234A shall also be increased or decreased accordingly.
[II] Interest U/S 234B:
PART – A: Failure to pay Advance Tax:
In case if an assessee, who is required to pay Advance Tax in accordance with the provisions of Section 208 and the amount of Advance Tax paid by him is less than 90% of the amount of Advance Tax payable by him, then Interest U/S 234B is attracted as follows:
Rate : Simple interest @ 1% p.m. or a part of a month
From : 1st April of A.Y.
Till : The date of determination of income u/s, 143(1) or till the date of completion of reg. assessment whichever is later.
On what Tax determined U/S 143(1) DTAA Relief + MAT
|
Less |
Amount: or in a Regular Assessment Credit + TDS + TCS –
Advance Tax paid
Credit of S.A. Tax shall also be given and interest U/S 234B shall then be calculated only on the balance amount.
PART – B: Failure to pay additional tax as demanded U/S 147 or U/S 157A:
Rate : Simple interest @ 1% p.m. or a part of a month.
From : Date of determination of tax U/S 143(1) or in a Regular Assessment.
Till : Till the date of completion of Re-Assessment / Recomputation
U/S 147 or U/S 153A
On what Amount:
|
Less |
Tax determined U/S 147 or in a Tax determined in an earlier
Re-Assessment u/s 153A proceeding
Points to be noted:
If the amount of tax, on which interest U/S 234B is calculated is increased or decreased by way of –
a) a Rectificational order U/S 154/155
b) an Appeallete U/S 250/254/260/262
c) a Revisional order of CIT U/S 263/264
d) an order of Income Tax Settlement Commission (ITSC) U/S 245D
then the amount of interest U/S 234B shall also be increased or decreased accordingly.
[III] Interest U/S 234C: Interest for deferment in payment of Advance Tax Installment:
PART – A: For Corporate Assessee:
1) If the amount of Advance Tax paid by 15th June is less than 15% of the amount of tax on returned income, then a simple interest @ 1% p.m. will be levied for 3 months on the amount of shortfall. However, no interest shall be levied U/S 234C if the Advance Tax Installment paid is not less than 12% of the tax on returned income.
2) If the amount of Advance Tax Installment paid by 15th September is less than 45% of the amount of tax on returned income, then a simple interest @ 1% p.m. for a period of 3 months will be leviable on the amount of shortfall.
However, no interest shall be levied U/S 234C if the amount of Advance Tax Installment paid by 15th September is not less than 36% of the tax on returned income.
3) If the amount of Advance Tax Installment paid by 15th December is than 75% of the amount of tax due on returned income, then a simple interest @ 1% p.m. for a period of 3 months shall be levied on the amount of shortfall.
4) If the amount of Advance Tax Installment paid by 15th March is less than 100% of the tax due on the returned income, then a simple interest @ 1% p.m. for a period of 1 month will be levied on the amount of shortfall.
PART – B: For Non-Corporate Assessee:
1) If the amount of Advance Tax Installment paid by 15th September and 15th December is less than 30% or 60% respectively of the tax due on the returned income, then a simple interest @ 1% p.m. for a period of 3 months shall be levied on the amount of shortfall.
2) If the amount of Advance Tax Installment paid by 15th March is less than 100% of amount of tax due on returned income, then a simple interest @ 1% p.m. for a period 1 month will be levied on the amount of shortfall.
Points to be noted:
1) Calculation of interest U/S 234C is always based on the amount of tax due on returned income, unlike calculation of interest U/S 234A and 234B, which are based on the amount of tax determined by the department.
Therefore, if the amount of tax on which interest U/S 234A, 234B or 234C was leviable undergoes any changes due to an order of higher authorities U/S 154, 155, 250, 254, 260, 262, 263, 264 or 245D, then the amount of interest U/S 234A and 234B will undergo changes, but amount of interest U/S 234C will not undergo any changes.
2) If the default in the payment of Advance Tax Installment is attributable to underestimation or failure to estimate –
a) Capital Gains
b) Winning from Lotteries, Crossword Puzzle, Card Game or any other Game of any sort or Winning from Races including Horse Race or Gambling or Betting.
then,
No interest U/S 234C shall be levied for such default, provided the amount of tax on such income is paid by assessee after the receipt of such income along with the remaining Advance Tax Installment due and if no installment are due then, only if assessee has paid tax on such income by 31st March of the F.Y.
3) Interest paid or payable U/S 234A / 234B / 234C will not be allowed to the assessee as a deduction while computing his total income.
Power to reduce or waive off interest leviable U/S 234A, 234B & 234C
C.B.D.T has delegated the power to reduce or waive off interest U/S 234A/234B/234C to CCIT or DGIT, in the following circumstances:–
1) As a result of search proceedings, if Books of Accounts and Documents belonging to the assessee were seized by the departmental authorities and were not available to the assessee to prepare his ROI for the year of search and assessee could not file his ROI within the due dates prescribed U/S 139(1).
2) An income other than Capital Gains and Winnings from Lotteries etc., was received by the assessee after the due date for the payment of Advance Tax Installment, which was never anticipated nor contemplated by assessee then interest U/S 234C pertaining to advance tax on such income can be reduced or waived off, provided the tax on such income is paid by assessee after the receipt of such income along with the remaining installments due .
3) In a case where an assessee could not furnish his ROI due to circumstances beyond his control and the ROI is filed voluntarily by assessee or his legal heirs before detection of the same by dept. then interest leviable U/S 234A can be reduced or waived off.
4) As a result of Supreme Court decision or any Retrospective amendment of Law taking place after the end of the financial year, if any income, which was treated as exempt earlier has now become chargeable to tax, then no tax would have normally been paid on such income. Interest U/s 234C or 234B attributable to such income can be reduced or waived off.
Section 220: Assessee deemed to be in default:
1) Whenever any tax, interest, penalty or any other sum is found payable by an assessee, a notice U/S 156 (Notice of demand) has to be issued to the assessee, requiring the assessee to make the payment of sums demanded in such notice, within a period of 30 days from the date of receipt of such notice by assessee.
2) However if the A.O. is of the opinion that it will be detrimental to the revenue if entire 30 days period is allowed to the assessee, then A.O. may with the prior approval of JCIT require the assessee to make the payment within lesser number of days.
3) On the other hand if assessee finds himself unable to make the payment within 30 days, he may make an application for extension of time. If A.O. is satisfied, then he may extend the time for payment or may allow the payment to be made in installments subject to further conditions imposed by A.O.
4) If assessee finally does not make the payment within 30 days or within lesser number of days, or within the extended time, then after expiry of the time granted to him, he will be deemed to be ‘an assessee in default’.
5) If the amount demanded from the assessee is challenged by assessee in an appeal, then A.O. may not treat the assessee to be in default with regards to the amounts disputed in appeal, till the time of final disposal of the appeal.
6) Similarly an assessee shall not be deemed to be in default in respect of the amount of tax on an income earned outside
However, if such income has been brought to
Section 220(2): Interest:
1) If the sums demanded from assessee in Demand Notice U/S 156 are not paid by the assessee, within 30 days from the date of receipt of such notice, then a simple interest @ 1% p.m. or a part of a month is leviable from 31st day onwards, irrespective of whether the time limit was extended by A.O. or not, or whether installment facility was granted or not.
2) This interest U/S 220(2) is leviable only on an amount remaining unpaid after 30th day. (therefore, if part payment was made by assessee, then it can save him from levy of interest on that part which is already paid by him)
3) If the amount on which interest U/S 220(2) is to be calculated, undergoes any changes due to an order of any higher authorities then the amount of interest U/S 220(2) shall also undergo changes accordingly.
4) C.I.T. can reduce or waive off interest levied or leviable U/S 220(2) if the following conditions are satisfied –
a) Payment of such interest has caused or would cause genuine hardship to the assessee.
b) The default was due to circumstances beyond the control of the assessee and
c) Assessee has co-operated in any enquiry relating to assessment or relating to the proceedings for recovery of taxes due from him.
Section 221: Penalty:
1) Whenever, an assessee is in default or is deemed to be in default, penalty U/S 221 can be levied by A.O. after giving a reasonable opportunity of being heard to the assessee.
2) The amount of penalty shall be determined by A.O. in such a way that the amount of penalty does not exceed, the amount of tax in arrears.
3) No penalty if assessee proves to the satisfaction of A.O. that there was a reasonable cause for the default.
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