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 Interest

Interest




In the following circumstances, simple interest is payable by the assessee

Section

Purpose

Amount

Rate

Period From

Period Upto

234A

A person required to furnish return of income -

a) fails to furnish a return; or

b) furnishes it after the due date specified u/s 139(1)

Tax determined u/s 143(1) or on Regular assessment*

Less: Advance Tax

Less: Relief u/s 90 or 90A or 91

Less: MAT Credit u/s 115JAA

Less: TDS / TCS

1%

The day immediately following the due date for furnishing return for the relevant assessment year

Date of furnishing return or where no return is submitted Date of completion of assessment u/s 144

234B

Where a person, who is required to pay advance tax, fails to pay 90% of assessed tax as advance tax

Assessed tax - Advance tax paid

Further, if self assessment tax is paid, reduced the amount by such tax for the period after the date on which such self assessment tax is paid.

Assessed tax means tax determined u/s 143(1) or Regular assessment

Less: Relief u/s 90 / 90A / 91

Less: MAT Credit u/s 115JAA

Less: TDS / TCS

1%

1st day of April of the relevant assessment year  

The date of determination of tax u/s 143(1) or on regular assessment

234C

Assessee fails to pay appropriate Advance Tax

Specified % of tax on the total income declared in the return filed by the assessee

Less:  TDS / TCS

Less: Advance tax paid on or before the due date of payment as per the advance tax payment schedule.

Less:  Relief u/s 90 / 90A / 91

Less:  MAT Credit u/s 115JAA

1%

The day after the due date of installment payment of advance tax

The due date of next installment or 31st March of the Previous Year, whichever is earlier.


In short, 3 months (1 month for march installment) (See notes)

234D

Where any refund is granted to the assessee u/s 143(1) and "

  • no refund is due on regular assessment; or

  • the amount refunded exceeds the amount refundable on regular assessment

On the whole or excess amount refunded

1/2%

Date of grant of refund 

Date of such regular assessment

220(2)

Any person fails to pay tax  as specified in the demand notice

On the amount specified in the notice of demand

1%

After the expiry of period specified  in said demand notice

Day on which such amount is paid

201(1A)

Where a person, responsible for deducting tax at source, fails to

  • deduct tax at source; or

  • deposit such tax after deducting the same

On the amount of such tax

1%

The date on which such tax was deductible

The date on which such tax is deducted




1.5%

The date on which such tax is deducted

The date on which such tax is actually paid to the Government

206C(7)

Where a person, responsible for collecting tax at source, fails to -

  • collect tax at source; or

  • deposit such tax after collecting the same

On the amount of such tax

1%

The date on which such tax was collectible

The date on which such tax is actually paid to the Government

Notes

  • Amount on which such interest is calculated will be rounded off to the multiple of 100 by ignoring any fraction of 100. E.g., amount on which interest is to be calculated is Rs.540 or Rs.590, then it is to be rounded off to Rs.500 by ignoring fraction of Rs.40 or Rs.90.

  • When interest is calculated on monthly basis, any fraction of the month shall be taken as full month.

  • For the purpose of self-assessment u/s 140A, interest shall be calculated on tax liability as declared in the return by the assessee

  • Where tax payable is reduced or increased by an order u/s 154, 155, 245D, 250, 254, 260, 262, 263 & 264, the amount of interest shall be reduced or increased accordingly.

  • Interest u/s 234B and 234C are payable for default in payment of advance tax. However, sec. 234B is applicable for the period commencing from 1st day of Assessment Year. Whereas interest u/s 234C is payable for deferment of advance tax during the previous year. 

  • Where a company has paid 12% or more of tax as advance tax on or before June 15, of the previous year then no interest u/s 234C is payable for any shortfall in payment of advance tax for 1st installment.

  • Where a company has paid 36% or more of tax as advance tax on or before September 15, then no interest u/s 234C is payable for any shortfall in payment of advance tax for 2nd installment.

  • No interest u/s 234C will be levied in respect of any shortfall in the payment of advance tax due on the returned income, if -

  1. The shortfall is on account of under-estimation or failure to estimate the amount of capital gains or income of the nature referred to in section 2(24)(ix) [i.e. lottery, cross-word, etc.]; and
  2. The assessee has paid the whole of the amount of tax payable in respect of such income as part of the remaining installment(s) of advance tax which were due or where no installment were due, by March 31 of the previous year.


Interest in case of Reassessment

234A

Where -

  • a return of income is required to be furnished due to notice u/s 148 or 153A (second and subsequent time); and

  • assessee fails to furnish such return within time allowed under that section or fails to furnish return of income at all,

- then, assessee shall be liable to pay simple interest @ 1% for every month or part thereof on the amount by which tax on total income as per sec.147, exceeds the tax on the total income determined on the basis of earlier assessment.

Such interest is payable for a period commencing on the day immediately following the expiry of the time allowed under that notice and ending on -

Where the return is furnished after the expiry of time allowed

Date of furnishing return

Where the return is not furnished at all

Date of completion of reassessment u/s 147 or 153A


234B

Where as a result of an order of reassessment or recomputation u/s 147 or 153A, the amount on which interest is payable is increased, the assessee shall be liable to pay simple interest @ 1% for every month or part thereof on the amount by which tax on total income exceeds the tax on total income determined on the basis of earlier assessment.
Such interest is payable for a period -

Commencing on

Day following the date of assessment u/s 143(1) or regular assessment

Ending on

Date of the reassessment or recomputation u/s 147 or 153A

Waiver or reduction of interest u/s 234A, 234B & 234C

  • The Chief Commissioners and the Directors-General (Investigation) is empowered to reduce or waive penal interest u/s 234A, 234B and 234C in the following circumstances* -

    1. Where, in the course of search and seizure operation, books of account have been taken over by the Department and were not available to the taxpayers to prepare his return of income.

    2. Where, in the course of search and seizure operation, cash had been seized, which was not permitted to be adjusted against arrears of tax or payment of advance tax installments falling due after the date of the search.

    3. Any income other than capital gains which was received or accrued after the date of first or subsequent installment of advance tax, which was neither anticipated nor contemplated by the taxpayer and on which advance tax was paid by the taxpayer after the receipt of such income.

    4. Where, as a result of any retrospective amendment of law or the decisions of the Supreme Court after the end of the relevant previous year, certain receipts, which were earlier treated as exempted income, now become taxable.

    5. Where return of income is filed voluntarily without detection by the Income tax Department and due to circumstances beyond control of the taxpayer such return of income was not filed within the stipulated time-limit or advance tax was not paid at the relevant time.

* The above circumstances are indicative only.

  • The Chief Commissioner of Income Tax/Director General are empowered to waive or reduce interest u/s 234A, 234B and 234C on income which accrues or arises for any previous year due to the operation of any order of a Court, statutory authority or of the Government (other than an order of assessment, appeal reference or revision passed under the provisions of the Income tax Act) passed after the close of the said previous year [Order F. No. 212/495/92-ITA-II dt. 2-5-1994]


Interest on refund [Sec. 244A]

An assessee who is entitled to get refund shall also be entitled to interest on such refund. Provision relating to interest is enumerated below -

Rate of interest: Simple interest @ % per month or part thereof 

Period for calculation of interest

Case

Period

Where refund is out of TDS or TCS or Advance tax (Note 1)

From first day of relevant assessment year to the date on which such refund is granted

Refund due to any other reason

From date of payment of such tax to the date on which such refund is granted

Notes

  1. Interest on refund due to TDS or TCS: Interest on refund due to TDS or TCS etc. shall be allowed, provided the amount of refund is not less than 10% of the tax determined u/s 143(1) or on regular assessment.

  2. Taxability of refund and interest on refund: It is to be noted that refund of tax itself is not taxable. However, interest received on delayed refund is taxable under the head Income from other sources.

  3. Adjustment in interest: Where tax payable is reduced or enhanced by an order u/s 143(3), 144, 147, 154, 155, 250, 254, 260, 262, 263, 264 & 245D(4), the amount of interest shall be reduced or enhanced accordingly.

  4. Delay in refund due to reason attributable to the assessee: Where the refund are delayed for the reason attributable to the assessee, the period of delay so attributable to him shall be excluded from the period for which interest is payable. Further, where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision shall be final.