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Clarification related to Section 234b of IT Act

Srinath Menon (Others) (37 Points)

30 September 2020

Dear All,

While filing ITR for AY 2020-21, I am seeing that Section 234b is being levied as well. In my case the only difference here is that the interest from FD's is being added to the overall income.

I am not able to understand why this fine is being levied since being a salaried employee all the taxes are done as part of TDS.

Would appreciate any help in this matter.

Kind Regards,

Srinath Menon

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4 Replies

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 30 September 2020

Sir, if there is any tax payable after claiming TDS credit, than on that interest u/s 234 B is leviable.

As you mentioned, there is FD interest is being added, So, it's due to that your overall income increase and subsequently tax liability increase..

So, interest is payable on that increased tax liability ( because it's not already Paid).

Srinath Menon (Others) (37 Points)
Replied 30 September 2020

In this case how would I know what would be my interest income when FD rates are fluctuating so frequently ? And in this kind of a scenario what should an individual do to avoid such fines?

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 30 September 2020

To avoid such interest you have to estimate (not exact) your total income and tax payable thereon.

If your tax payable after TDS amount is more than 10,000 than you have to pay advance tax.

or otherwise you can declare your estimated interest income to employer (if you want) than Employer will deduct you TDS accordingly.

Raghuteja Lakkireddy (93 Points)
Replied 30 September 2020

Sir, in my opinion Interest under section 234B is applicable when:
Your tax liability after reducing TDS for the financial year is more than Rs 10,000 and you did not pay any advance tax.
OR
You paid advance tax, but advance tax paid is less than 90% of ‘assessed tax’.
In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

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