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Interest levied u/s 234C despite paying advance tax

05 August 2021

Dear All,

I had received certain income (principal+interest) from RERA on account of dispute on property. The interest part was received on 22.10.20 & 30.12.20 and accordingly, I had paid the advance tax on it on 22.10.20 & on 01.03.20.

However, while filing ITR-2 in efiling portal, the system is applying an interest u/s 234C. Please let me know what is the solution?

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13 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 05 August 2021

This could happen if there was any shortage in payment of tax while estimating the advance tax liability. Are you sure there is no such discrepancy?

Gaurav Mittal (23 Points)
Replied 05 August 2021

Madam,

There is no discrepancy. I had received Rs. 500,000 (interest part is only Rs. 443,425 & rest is part of principal) on 22.10.20 & Rs. 583,097 on 30.12.20. I had paid advance tax of Rs. 200,000 on 22.10.20 & Rs. 125,000 on 01.03.20. I have to receive a net refund of Rs. 68,708 on the overall income from the income tax.

Is there any discrepancy?

CMA Poornima Madhava (CMA) (13097 Points)
Replied 05 August 2021

With this much info, I would not be able to tell if there is any discrepancy as I do not have info on other incomes earned by you.

If you think there is no discrepancy, probably the ITR utility might have some errors though am not sure about this. See if you can use some other online calculators to compute interest.

Gaurav Mittal (23 Points)
Replied 05 August 2021

I would like to add that in the new efiling system, under the "income from other sources", and under that "Information about accrual/receipt of income from Other Sources", there is no option to add the details of accruals of incomes other than "dividend income", "Income by way of winnings from lotteries, crossword puzzles, races, games, gambling, betting etc. referred to in section 2(24)(ix)" and "Dividend Income chargeable under DTAArates".

This may be the reason why the system is adding the interest u/s 234C. Where does one show the information about the accruals of income, like in my case, an exceptional income received in a particular year from RERA?

Gaurav Mittal (23 Points)
Replied 05 August 2021

Ma'm,

If I remove this particular income I'm referring to, the interest levied u/s 234C automatically gets removed. The interest is only getting added because of this income. Other incomes in this section are only from Dividend, FD & savings account, which amount to Rs. 95817. Beyond this is only salary, on which TDS has been deducted by the employer.

CMA Poornima Madhava (CMA) (13097 Points)
Replied 05 August 2021

I understand that you have computed tax @ 30% on Rs.10.83 lacs which comes out to Rs.3.25 lacs. What about cess @ 4% and is surcharge applicable to you. Just check whether this is the difference on which 234C is being applied.

Gaurav Mittal (23 Points)
Replied 05 August 2021

Ma'am,

The refund interest amount is Rs. 443,425 + Rs. 583,097 = Rs. 10,26, 522. On this amount, I calculated 30% & 4% cess, which works out to be Rs. 320,275. Accordingly, I paid advance tax of Rs. 3.25L.

Besides, I have a net refund to claim against the total tax (advance tax, TDS, etc.). So, why should there be any interest levied at all?

Also, in the new efiling system, under the "income from other sources", and under that "Information about accrual/receipt of income from Other Sources", there is no option to add the details of accruals of incomes other than "dividend income", "Income by way of winnings from lotteries, crossword puzzles, races, games, gambling, betting etc. referred to in section 2(24)(ix)" and "Dividend Income chargeable under DTAArates".

Is this the reason why the system is adding the interest u/s 234C. Where does one show the information about the accruals of income, like in my case, an exceptional income received in a particular year from RERA?

Gaurav Mittal (23 Points)
Replied 06 August 2021

One more thing I would like to add that I tried yesterday. I added this interest received of Rs. 10.26L to my dividend received & then accordingly changed the field of "Information about accrual/receipt of income from Other Sources" to show the sum of this income and the dividend income on a quarterly basis.

Subsequently, the system did not levy any interest u/s 234C & hence, my calculations are correct. However, can I actually show my income like this in the ITR, i.e. add my interest income to the dividend income & show the net income as dividend, since everything is taxable?

CA.Pujah (Service) (1005 Points)
Replied 06 August 2021

Interest under section 234C is not levied, if, the shortfall in payment of advance tax is due to failure to estimate the amount of capital gains or income referred to in section 2(24)(ix) (i.e. winning from lotteries, crossword puzzle, etc.) or income from a new business or income referred to in section 115BBDA (i.e., dividend received from a domestic company exceeds Rs. 10,00,000) and the taxpayer pays the required advance tax on such income as a part of immediate following instalments or till 31st March, if no instalment is pending.

So, for ITR-2 only exemption available is capital gains, winning of lotteries & dividend as above.

But in your case this exemption is not available.

Also, the new portal is not calculating the interest u/s 234C correctly in case of the exemptions as above. I am hopeful of early correction in portal.

Gaurav Mittal (23 Points)
Replied 06 August 2021

Thank you for the reply. The income received from RERA can't be estimated as well since it is subject to the builder releasing it, which is uncertain. In that case,

(i) Can I show it under "winning from lotteries, crossword puzzle, etc" since this income is uncertain?

(ii) Can I show it in dividend income itself? Will it lead to wrong filing of ITR?

CA.Pujah (Service) (1005 Points)
Replied 06 August 2021

Sorry that is not advisable. tax is to be assessed on income taxable as per Act. Like yours, there are many other incomes which can't be estimated, but exemption is not available there and we have to follow the Act.

Samantha J (1236 Points)
Replied 06 August 2021

Try SI sch

Gaurav Mittal (23 Points)
Replied 09 August 2021

I agree to what you have said, however, when I added the entire income to dividend income & also changed the amounts of quarterly accruals, the system didn't apply the interest. This means that the system is considering the advance tax payments by me when added to the dividend income.

Also, advance tax should be paid upon receipt of the particular income, isn't it? Same is the case with salary/bank interest, etc.