HOW TO CALCULATE INTEREST u/s 234 OF INCOME TAX ACT Interest u/s 234A is the Interest for default for Furnishing Return of Income u/s 139(1) or 139(4) or Return filed in response to notice u/s 142(1). 1.- CONDITIONS FOR LEVY OF INTEREST u/s 234A
a) Where Return of Income (ITR) is not furnished by Assessee. b) Where Return of Income (ITR) is furnished by assessee after Due Date of furnishing Return specified u/s 139(1). 2.- RATE OF INTEREST
>1% per month or part of month. (Part of month means Interest for whole month is charged @1% even if the default is for 1 day) 3.- AMOUNT ON WHICH INTEREST u/s 234 A IS COMPUTED Total Tax Liability XXX Less- TDS XX Relief u/s 89(1) XX Relief u/s 90/91 XX Advance Tax XX NET TAX LIABILITY XXX 4.- CHARACTERSTICS OF INTEREST U/S 234A
>Interest u/s 234A is mandatory in nature which can only be waived off by chief Commissioner of Income Tax (CCIT) or Direct General of Income Tax (DG). >If the amount of self assessment tax paid by assessee fall short of the amount required to be paid u/s 140A as self assessment tax. Then the amount so paid shall be first adjusted towards Interest and balance towards Income Tax. 5.- ILLUSTRATIONS
Suppose an individual furnish his ITR on 1st Sept.2015 and the due date of filing is 31st July,2015. Income from salary = Rs 3,50,000 Tax Payable By Individual = Rs 10,000 TDS deducted on salary = Rs 2,000 Then, Interest required to be paid by such individual u/s 234A is: Period of default = 2 months (August/September) Rate of Interest = 1% Amount of Interest = (10,000-2,000)1%*2 months = Rs 160 Author Can Be Reached At : Ankit Gupta ankit@taxzippy.com
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