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Amount of Interest Under Section 234B

SUNNY (STUDENT CS) (377 Points)

28 May 2011

IF TAX LIABILTY IS 21212/- IN THE END OF MAR 2011.

& ADVANCE TAX PAID IS 18000/- ON 11/03/2011.

THEN WHAT IS AMOUNT OF INTEREST UNDER SECTION 234 B ?

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11 Replies

suman (Auditor ) (388 Points)
Replied 28 May 2011

Assuming payment will be made in june intt will be rs. 97 . Rate is 1% p.m. on assessed tax liability . which is in your case rs 3312, ( 21212-18000) .

CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 10 June 2011

sectuon 234A B C are applicalbe only if balance tax liability unpaid is more than 10000, as in your case if only 3000 odd there will be no interest under section234b

CA Vishal Jain (Chartered Accountant) (137 Points)
Replied 10 June 2011

Originally posted by : NIMIT MEHTA
	sectuon 234A B C are applicalbe only if balance tax liability unpaid is more than 10000, as in your case if only 3000 odd there will be no interest under section234b

If your Aggregate tax liability for the year after deducting TDS & TCS but before deducting advance tax exceeds Rs. 10,000/- than you are liable to pay Interest u/s 234B & 234C.

In your case Interest u/s 234B will be as follows (assuming payment is made in June)

Gross Tax Liability 21,212/-

Less: Advance Tax till 31st March 18,000/-

Net Tax liability 3,212/-

R/off to 100 (ignore fraction) 3.200/-

Interest u/s 234 B @ 1% p.m. for 3 months 96/-

Interest u/s 234C will be in excess of interest u/s 234B

1 Like

CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 15 June 2011

at first tax and income are rounded off to nearest 10 rupees only and not 100 rupees under section 288b and c and after advance tax only 234b is applicable which is less than 10000/- and advance tax is also paid before 15th march so there is no scope of leiving interest under 234b and 234c. if advance tax is not paid by 15th march then however 234c is applicable becoz he has paid only one installemnt of advance tax which too is not counted as paid and tax laibility becomes 21212/- where 234b also applies i.e 21212*3% (assuming balance tax u are going to pay in june)

for 234c:

up to 30th september 21212*30%-0=6364*3%=191

up to 31st december 21212*60%-0=12727*3%=382

up to 15th march 21212-0=21212*1%=212

so total of 191+382+212=785

1 Like

Mohammad Asif (chartered accountant) (191 Points)
Replied 15 June 2011

go with suman and vishal

(Guest)

I am giving u the case where assessee is calculating interest u/s 234B. Section 234B is applicable

if tax paid is less than 90% of returned tax.

90% of tax 21,212 comes to Rs. 19,090. Tax paid is 18,000. Now tax paid is less than 18,000.

Interest u/s 234B shall be calculated on 21,212 - 18,000 = 3,212. Round off to 3,200.

Period of default shall start from 1-4-2011 till the tax is paid.

Now suppose tax is paid on 31-7-2011. Period of default is 4 months.

Interest 1% of 3,200 x 4 = 128.

As when your tax increased in the assessment interest shall also be increased.

1 Like

CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 16 June 2011

A neat reading of provisions of section 234B 210 and 208 tells:

234B: It has two parts one the person who is liable to pay advance tax under section 208, section 208 says if tax implications go beyond 10000/- then liability to pay advance tax arises, as tax is only 3210/- it does not attract 234B,

second part says a person who is liable to pay tax under section 210 ( section 210 indirectly reverts the matter again to section 208 where tax implications must go beyond 10000/-,) has not paid 90% of assessed tax according to section 210. I qoute: "where the advance tax paid by such assesee under the provisions of section 210 is less than 90% of assesseed tax then ..............", so provisions of 234B gets attracted in both the parts only of sections 210 and 208 gets attracted so in this case as tax payable is 3210 only there is no scope of interest under 234B.

234C also gets attracted only when liability to pay advance tax arises so here also there is no scope of interest under 234c , becoz on the both sections words " person liable ot pay advance tax under section 208" is used