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Interest payable for Defaults in Payment of Advance Tax [Section 234B(1)]

 

When interest is payable:

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 u/s 143(1) or on regular assessment made u/s 143(3)/144 or on first time assessment u/s 147 or u/s 153A (whichever section is applicable)

 
Less :    
  1. TDS/Tax collected at source

  2. 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 —

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

 

 

 
Assessed Tax  

 

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 under section 143(3)/144 if there was no determination made under section 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:

  1. When no tax is paid on self assessment or otherwise: Interest is payable on assessed tax minus advance tax paid, if any;

  2. Where tax has also been paid on self assessment or otherwise

    1. 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

    2. 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.

 
CONTENT :  Advance Tax and Refund

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