Interest u/s 234A of the Income Tax Act

Under Income Tax, different types of Interest are levied for various kinds of delays/defaults. For Income Tax Return late filing, Advance tax delayed payment and for short-payment of advance tax, there is Interest payable by the assessee, which is chargeable u/s 234A, u/s 234B, and u/s 234C respectively of Income Tax Act. Under this post, we will discuss Interest Under Section 234A with Example.

Interest Under Section 234A

Basic Provision- Interest u/s 234A is levied for delay in filing the return of Income. In other words, if the taxpayer files the return of income after the due date specified in this regard, interest u/s 234A will be levied.

Rate of Interest- Interest u/s 234A is levied for delay in filing the return of income. Interest is levied at 1% per month or part of the month. The nature of interest is simple interest. In other words, the taxpayers are liable to pay simple interest at 1% per month or part of a month for delay in filing the return of income.

Period of levy of interest- Interest u/s 234A is levied from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in the case where no return has been furnished, on the date of completion of the assessment under section 144.

Amount liable to interest u/s 234A- Interest under section 234A is levied on the amount of tax as determined u/s 143 (1) and where regular assessment is made, the tax on total income as determined under such regular assessment as reduced by the advance tax, tax deducted/collected at source, the relief claimed under various sections like sections 89/90/90A/91 and tax credit claimed u/s 115JAA/115JD.

Section 234A interest calculation with example

For the Interest calculation under section 234A, we can understand it with an example.

Example for Interest under section 234A

Mr. Kiyaan has failed to file his Income Tax Return on which the tax payable was Rs. 2,00,000 (After Advance tax and TDS/TCS etc.) The due date was 31st July 2021 and he submits his Income Tax Return on 2nd December 2021. The Interest calculation will be as follow-

Tax Payable- Rs. 2,00,000

Delay in filing of Return- From 31st July to 2nd December i.e 5 Months

Interest under section 234A- 2,00,000*1%*5= Rs. 10,000.

Frequently Asked Questions

What is Interest under section 234A?

Income Tax Act had made a provision of Interest payment for late filing of Income Tax returns. Interest u/s 234A is calculated @ 1% for every month or part of the month on the amount of tax payable. This interest is calculated from the due date to the date of the actual filing of the Income Tax Return.

How is interest calculated under section 234A?

Interest u/s 234A is levied for delay in filing the return of income. Interest is levied at 1% per month or part of the month. It is levied from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in the case where no return has been furnished, on the date of completion of the assessment under section 144.

What is 234A, 234B, and 234C?

Under Income Tax, different types of Interest are levied for various kinds of delays/defaults. For Income Tax Return late filing, Advance tax delayed payment and for short-payment of advance tax, there is Interest payable by the assessee, which is chargeable u/s 234A, u/s 234B, and u/s 234C respectively of Income Tax Act.

Why is there interest under section 234B?

Section 234B deals with the following two cases-
A) When the taxpayer has failed to pay advance tax though he is liable to pay advance tax.
B) Where the advance tax paid by the taxpayer is less than 90% of the assessed tax.

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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.

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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)

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