Rashi Bajaj
(CA)
(752 Points)
Replied 23 June 2015
Interst u/s 234B is payable on assessed tax from April(of the respective Assessment year) till the month of actual discharge of liability.
In your case, if the balance SA Tax payable was Rs. 2Lacs, then interest @ 1% was payable only for April(for A.Y. 2015-16) if you have discharged the entire liability.
aishwaryanoorni
(student)
(88 Points)
Replied 23 June 2015
Balaji R K
(Salaried)
(158 Points)
Replied 23 June 2015
The section 234B is for - Interest on default in payment of Advance tax by any assessee.
(A) Where in any financial year, an assessee who is liable to pay advance tax u/s. 208 has failed to pay such tax or the advance tax paid by such assessee is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest @ 1% for every month or part of a month.
(B) The period for which interest is payable would be the period from the first day of April next following such financial year to the date of determination of total income u/s. 143(1). However, if regular assessment u/s. 143(3) is completed, then interest is chargeble up to the date of regular assessment.
(C) The amount on which interest shall be calculated shall be the amount equal to the assessed tax or on the amount by which the advance tax paid falls short of the assessed tax.
As per the question Advance tax should be paid on or before 15th of March for the financial year by the assessee on his tax.
It is calculated as follows.
Tax Liability
Add : Education Cess
Less : TDS or Advance tax (if any)
Equal to : Assessed Tax
It the assessed tax is more than Rs.10,000 /- then Interest under section 234B will get attracted and the assessee is expected to have been paid 90% of the same as advance tax.
If the assessee not paid then 234B will be added to his total tax disbursement for the financial year even though the assessee has paid the self assessment without considering the Interest under section 234B.
Hope this helps.
aishwaryanoorni
(student)
(88 Points)
Replied 23 June 2015
Balaji R K
(Salaried)
(158 Points)
Replied 24 June 2015
Yes thats right the assessee has to pay the interest under section 234B. The reason being the assessee has supposed to pay the advance tax on or before 15th of March every year. If the assessee failed to do so, then the interest will get attracted till the assessee files return of income for the year.
Rashi Bajaj
(CA)
(752 Points)
Replied 24 June 2015
Ashwarya, Let me give you an example considering your situation:
Gross tax liability: 325000
TDS: 25000
Advance tax: Nil
S.A. tax in April: 200000
Computation of interest u/s 234B(only) in June:
| Total advance tax payable | (325000-25000) | Rs. 3,00,000/- |
| Less: Paid till 15th March | Rs. 0 | |
|
Since 90% advance tax not paid,interest under 234B Till April: From April to June(or till the time you actually pay/completion of regular assessment, whichever is earlier) |
300000*1%*1month (300000-200000)*1%*3 months(or till period as specified in Col. 1) |
3000/- 3000/-(Subject to change as per col. 1) |
It may plz be noted the limit of Rs. 10000/- is for liability to pay advance tax only after considering TDS and reliefs. Once yo are liable to pay advance tax, there is no further limit as stated by Mr. Balaji.
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