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Interest payable for defaults in payment of Advance Tax [Section 234B(1)]

The assessee is liable to pay interest in the following cases:

(1)        advance tax has not been paid by the assessee; or

(2)        the advance tax paid by the assessee is less than 90% of the 'Assessed Tax'.

'Assessed Tax means:

Tax determined uls 143(1) or on regular assessment made u/s 143(3)1144 or on first time assessment u/s 147 or u/s 153A (whichever section is applicable)

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Less: (a) TDS/Tax collected at source

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(b) Any relief of tax allowed under section 89. (Inserted by the Finance (No. 2), 2019, w.e.f. 1.7.2007

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(c) the amount of relief of tax allowed under sections 90 and 90A and deduction from the Indian income-tax payable, allowed under section 91, and

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(d) tax credit allowed to be set off under section 115JAA / 115JD from the tax on the total income.

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Assessed Tax

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Rate of interest:

Simple interest @ 1% per month or part of the month.

Period for which interest is payable:

Interest will be payable from 1st April of the relevant assessment year to the date of determination of income u/s 143(1) and where a regular assessment is made, to the date of such regular assessment section/s 143(3) / 144 if there was no determination made section/s 143(1) or assessment made under section 143(3) or section 144 or first time assessment under section 147/153A, if there was no determination made under section 143(1) or assessment made under section 143(3) or section 144.

Amount on which interest is payable:

Interest is payable on 'Assessed tax' if no advance tax is paid. However, if any advance tax has been paid, interest will be payable on assessed tax minus advance tax paid.

Computation of Interest:

Interest will be computed as under:

(a)        When no tar is paid on self assessment or otherwise:          

Interest is payable on assessed tax minus advance tax paid, if any;

(b)        Where tar has also been paid on self assessment or otherwise

(i)      interest will be calculated on assessed tax - advance tax paid if any. It will be calculated for a period commencing from 1St April, to the date on which tax under section 140A or otherwise is so paid,

and thereafter

(ii)     interest shall be calculated on the balance amount (i.e. assessed tax - Advance tax - tax paid) till the date of determination of total income under section 143(1) or regular assessment under section 143(3)/144 or first assessment under section 147/153A, if there was no determination made under section 143(1) or assessment made under section 143(3) or 144.

Note.—Interest, computed as per clause (b) above, shall be reduced by any interest (computed as per provisions of section 234B) paid under section 140A.
Interest payable U/s 234B on Assessed Tax till the date of determination of Total Income under Section 143(1)

Interest will be computed under the following two steps:

Step 1

Assessed tax                                                    -

Less: Advance tax paid. if any                         -

Amount on which interest is payable             ____

Interest will be calculated on this amount from 1st April of the relevant assessment
year till the date of payment of lax on self-assessment under section 140A or
otherwise
@ 1% per month

Note.—            If in the above case, if some tax was also paid before the tax paid on self assessment under section 140A, interest will be computed in two pans.

Firstly from 1st April to the date of payment of such tax on (assessed tax — advance tax paid), and

Secondly from the date of payment of such tax to the date of payment of self-assessment tax on (assessed tax — advance tax — tax so paid)

Step 2

Interest will be computed from the date when tax on self-assessment under section 140A was paid till the date of regular assessment on the following:

Assessed tax (for meaning of assessment tax see above)

 

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Less: (1) Advance tax paid, if any

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(ii) Tax paid before or on self-assessment under section 140A

-

-

Amount on which interest is payable

 

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Note.—

If in the above case any tax is paid for the relevant assessment year after the tax paid on self assessment under section 140A, interest will be computed in two parts.

Firstly from the date of self assessment tax under section 1 40A to the date of payment of such tax on the amount computed as above, and

Secondly from the date of payment of such lax to the dare of regular assessment on (the amount computed as above minus the tax so paid).

Amount of interest computed under Step Nos. I and 2 shall be aggregated and from such aggregate interest, interest (computed as per provisions of section 234B) already paid on self- assessment under section 140A shall be deducted. The balance shall be the net interest payable.

 

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