SECTION 234A

   

The Income Tax Act’ 1961 covers a series of provisions relating to Interest wherein either such interest is being paid by the assessee to Govt. or in some cases is paid by the Income Tax Department itself, to the assessee. This module hence is attempted to make a comprehensive coverage of major interest provisions of the Income Tax Act in relation to such cases.

SECTION 234A: INTEREST FOR DEFAULT IN FURNISHING RETURN OF INCOME

I. Section 234A(1): Interest for default in furnishing of Return of Income U/s 139(1) or 139(4) or in response to a notice U/s 142(1):

S No.

Particulars

Description

1

Rate of Interest

Simple Interest @ 1% per month or part of the month
2

    Interest Due period

 

The interest would be payable for the period commencing on the date immediately following the due date and would end on:

  • In case of return of income being furnished after due date, the date of furnishing of return of income;

  • In case of return not being furnished at all, the date of completion of assessment U/s 144 (Best Judgment Assessment) or U/s 147/ 153A.

3

Amount on which Interest is due for payment.

 

Interest is payable on tax determined U/s 143(1) or on regular assessment U/s143(3)/ 144/ first assessment U/s 147/ 153A less the following:

  • Tax deducted &/ or collected at source;

  • Advance Tax paid by the assessee;

  • The amount of relief on tax allowed U/s 90, 90A & 91;

  • Tax credit allowed to be set off under Section 115JAA.

4

Computation of Interest

 

The Interest will be determined as under:

  • Step A: Firstly take the amount on which is due for payment (as calculated in S No.3 above)

  • Step B: Secondly compute tax payable U/s 140A (Self Assessment) after deduction of Tax deducted & collected at source, Advance tax paid, Amount of relief U/s 90/ 90A/ 91 and Tax credit allowable U/s 115JAA.

  • Step C: (Step A- Step B) × (No. of months ×1%)

II. Section 234A(3): Interest for default in furnishing of Return of Income required U/s 148

On determination of Income under section 143(1) or where the assessment has been done under section 143(3), 144, 147 and the Assessing Officer issues a notice:

• Under Section 148 for filing return of Income for the purpose of reassessment/ recomputation U/s 147, or

• Under Section 153A for assessment in case of search or requisition.

The assessee shall be liable to pay interest in the following cases:

  • When the return of income is furnished after the expiry of time allowed in the notice issued U/s 148 or U/s 153A;

  • Where no return of income is furnished by the assessee.

S No.

Particulars

Description
1 Rate of Interest

Simple Interest @ 1% per month or part of the month.
2 Interest Due period

The interest would be payable for the period commencing on the date immediately following the expiry of time limit specified in the notice U/s 148 or U/s 153A and would end on:

  • In case of return of income being furnished after due date, the date of furnishing of return of income;

  • In case of return not being furnished at all, the date of completion of assessment U/s 144 (Best Judgment Assessment) or U/s 147/ 153A.

3

Amount on which Interest

is due for payment.

 

Interest is payable on tax determined as under:

  • Tax determined U/s 147 or 153A;

  • Less: Tax on Total Income determined U/s 143(1) or an assessment made U/s 143(3), 144 or 147 earlier ;

  • The interest will be calculated on the amount so determined above.

4 Computation of Interest

The Interest will be determined as under:

  • Step A: Firstly take the amount on which is due for payment (as calculated in S No.3 above)

  • Step B: Secondly compute tax payable U/s 147

  • Step C: (Step A- Step B) × (No. of months of delay ×1%)