Get Lowest Rates for Health Insurance Mediclaim Plans starting @ Rs 250* / month +91 Enter mobile number Interest Penalty under Sections 234A, 234B & 234C Paying taxes and filing Income Tax Returns are not mandatory but they surely are the responsibility of every Indian citizen. The government clearly states that if an individual earns a certain amount of income in a year, he needs to pay the income tax. Failure in paying the tax or filing the ITR can lead to heavy penalties that would be borne by the individual. It is in your best interest to file your Income Tax Returns on a regular basis that too within the period allotted. It not only makes you a law-abiding citizen but also saves you from being penalised by the government. There are certain types of interests that are urged upon the taxpayer in case there has been non- payment of taxes. In order to learn calculating interest penalty under sections 234A, 2348 and 234C, let us learn what causes a penalty: CAUSES OF THE PENALTY SECTION Delay in the filing of Income Tax Return | 2344, Delayed Payment of Advanced Tax 234B Delayed Payment of Advanced Tax Instalment 234C Section 234A: Delay in filing Income Tax Return The Income Tax Return has to be filed at the end of a financial year, a failure to do so can lead to penalty charged by the IT department. In the case of an outstanding tax, payment of the balance amount and filing of the ITR can be done before 31 July of the assessment year. But, if this date isalso missed then the taxpayer is levied with interest charged at a simple interest at the rate of 1% of the outstanding amount every month. The interest, in such cases, is calculated from the 1st day after due date till the date of actually filing returns. While calculating the interest, a fraction of the month is also considered to be a full month. Calculating Interest Penalty under sections 234A In order to learn about calculating interest penalty under Sections 234A, let us take the help of this example, Ravi, a salaried employee, has an outstanding tax that amounts to INR 3 lakhs. He forgets to file his return before 31 July and now pays it on 15 January. So, as he is late in his payments, he will bbe penalised in the following way Interest (Penalty) = Outstanding Tax X 1% X Number of months (delayed) = 3,008,000 X 1% X 6 = INR 18,000 Therefore, Ravi would now have to pay INR 18,000 as penalty which is over and above his outstanding tax. Not paying his dues till March, he will be charged at the rate of 1% per month till the end of the financial year that is 31 March. Section 234B: Incomplete Payment of Tax If an individual's total payable tax in a financial year is more than INR 10,000, then he is liable to pay advance tax. An advance tax is the income tax that has to be paid in the same year in which the income has been earned. As per Section 44AD, when a taxpayer has a business that has 8% turnover on a tentative basis, he is not subject to pay the advance tax. Senior citizens too, who do have an income enjoy tax benefits under this section. Under Section 234B, the taxpayer must pay at least 90% of the tax that is due to be paid at the end of the financial year. In case the payment of advance tax is delayed, then a charge at the rate of 1% of the outstanding amount will be levied on him as a penalty. For the ease of the taxpayer, the advance tax can be paid on a quarterly basis. Calculating Interest Penalty under Sections 234B In order to learn about calculating interest penalty under Section 2348, let us take the help of this example, Meena has an outstanding tax that amounts to INR 2 lakhs. After application of TDS, the amount left was INR 1,82,650. On 25 March, Meena paid INR 7,000 and she paid the balance amount of INR 10,350 on 20 July. Meena should have paid 90% of the total assessed tax. Assessed tax is basically the tax that the taxpayer estimates. It is a rough idea on the basis of which he pre-pays his tax Assessed tax= Total Tax - TDS. Let us find out the assessed tax. = INR 2,00,000 — INR 1,82,650 = INR 17,350 So, it is clear that INR 17,350 was the assessed tax and 90% of it should have been paid that comes out to be INR 15,615. As Meena paid only INR 7,000, she will be penalised. Now, shewould have to pay, Interest (Penalty) = Outstanding Tax X 1% X Number of months (delayed) INR 15,600 (figure rounded) X 1% X 4 INR 624 Therefore, Meena would now have to pay INR 624 as penalty which is over and above her outstanding tax. Section 243C: Delay in Periodic Payment of Tax To make the ITR filing stress-free for the taxpayer, the Income Tax Department keeps innovating different ideas. The taxpayer has the provision to pay his tax in the form of 4 instalments. Under Section 234C, a penalty is imposed if the tax payment is delayed. The due dates for paying the Advance tax are: DUE DATE AMOUNT DUE RATE OF INTEREST 15% of Amount® less tax | Simple Interest @ 1% per On or Before 15 June already deposited before | month or part of the June 15 month for 3 months 45% of Amount* less tax | Simple Interest @ 1% per already deposited before | month or part of the September 15 month for 3 months On or Before 15 September 75% of Amount* less tax | Simple Interest @ 1% per On or Before 15 already deposited before | month or part of the December December 15 month for 3 months 100% of Amount® less tax | Simple Interest @ 1% per Onor Before 15 March _| already deposited before | month or part of the March 15 month for 1 month Calculating Interest Penalty under Section 234C In order to learn about calculating interest penalty under Section 234C, let us take the help of this example, Seema has a Total tax liability of INR 1 lakh that has to be paid in instalments. The break-up of the payments is as follows: TOTAL ADVANCE CUMULATIV CUMULATIV DUE DATE = TAX THAT aoe E E ISPAYABLE i pap «SHORTFALL PENALTIES Before or on o1%* 15,000 5,000 10,000 3*10,000 = 15 June 300ADVANCE DUE DATE TAX THAT IS PAYABLE Before or on 454 15 September | 45000 Before or on 15 December | 75000 Before oron | 5 46.999 15 March Frequently Asked Questions What is an advance tax? TOTAL ADVANCE TAX THAT Is PAID 25,000 35,000 50,000 What do you mean by Section 2344? CUMULATIV Ee SHORTFALL 20,000 40,000 50,000 CUMULATIV E PENALTIES @1%*3 *20,000=600 @1%*3 *40,000=120 0 1%" 1 *50,000=500 What is the formula for calculating interest penalty under Section 2344? What do you mean by Section 23487 What do you mean by Section 234C? lam 4 months 10 days late in filing my ITR, how to calculate interest penalty under Section 234A? What is assessed tax? 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