07 June 2009
How is Interest Calculated? Interest is computed from the date of the default until the outstanding amount is paid. It is computed on a daily basis, applying the prescribed annual interest rate. Example
For the period ending 31st March, Gauri files her return on 28th April. She has a positive net tax liability of Rs 1000, which she pays on the 10th of July. Let us assume that the notified interest rate is 16%.
Gauri will have to pay interest for the period 29th April to 10th July (i.e. 73 days).
The amount of interest is calculated as :
1000*73*16% ___________ 365
Therefore, the amount payable as interest should be = Rs 32.
In addition, you will also be liable to a penalty at the rate of 1% of deficit tax per week or Rs 100 per week, whichever is higher