CALCULATION OF

INTEREST IN INCOME
TAX ACT.
 INTEREST
INTEREST AND FEES PAYABLE BY THE
ASSESSEE
234A
234B
234C
234D
234E
234F
234G
234H
201(1A)
206C(7)
220(2)
 INTEREST

INTEREST PAYABLE TO THE ASSESSEE

244A
132B(4)
 INTEREST

Interest = product of
*Amount of default
* Period of delay
* Rate of interest
Procedure to be followed in calculating Interest
(Rule 119A)
 (i) Fraction of the month will be treated
as full month i.e. 4 months 1 day and 4
months 29 days both will be treated as 5
months.
(ii) the amount on which interest is to be
calculated shall be rounded off down to the
nearest multiple of one hundred rupees and
for this purpose any fraction of one hundred
rupees shall be ignored i.e. Rs.11,101 &
Rs.11,199 both will be Rs.11,100
 INTEREST U/S 234A
Charged for late filing of return or non filing
of return
Rate of interest : 1% per month or part of month

Amount : Assessed tax – (Adv. Tax + TDS* +

TCS*+ Relief u/s 90/90A/91+ MAT credit u/s 115JAA
or 115JD)
 INTEREST U/S 234A

 PERIOD : FROM THE DATE IMMEDIATELY

FOLLOWING THE DUE DATE OF FILING OF RETURN TILL
THE DATE OF FILLING THE RETURN OR THE DATE OF
COMPLETION OF ASSESSMENT U/S 144 (WHERE NO
RETURN HAS BEEN FILLED).

[IN CASE OF NOTICE U/S 148 OR 153A, THE PERIOD TO BE

COUNTED FROM THE EXPIRY OF THE TIME LIMIT
MENTIONED THERE]
 FROM THE FOLLOWING INFORMATION, COMPUTE THE
INTEREST PAYABLE BY INDIVIDUAL U/S 234A :

 ASSESSMENT YEAR 2022-23

 DATE OF FILING RETURN 20 / 12 / 2022
 DUE DATE FOR FILING RETURN 31 / 08 / 2022
 TAX DEDUCTED AT SOURCE Rs. 5000
 TAX PAID IN ADVANCE Rs. 15000

 TAX DETERMINED ON REGULAR ASSESSMENT ON THE BASIS OF

RETURNED INCOME Rs 25000
( Ministerial )
A female individual (26) files return of income on
15.10.2022 for the F.Y 2021-22 showing taxable
normal rate income of Rs.8,00,000/- , due date of
filing return being 31/08/2022. Advance tax paid by
her is Rs.14,180/-. Processing u/s 143(1) has been
completed without any addition.
Calculate interest u/s 234A
 SUM : 2
Mr X ( 30 ) files return of income on 15.10.2022 for the F.Y
2021-22 showing taxable normal rate income of
Rs.8,00,000/- due date of filing return being 31/07/2022.
Advance tax paid by her is Rs.14,180/-. He had paid entire
self assessment tax on 31/07/22. Processing u/s 143(1) has
been completed on 16.10.2022 without any addition.
Calculate interest u/s 234A

What if he pays The S.A. Tax on 01/08/2022

SUM : 4
Anindividual , male, 57 did not file his return of
income for the A.Y. 2022-23 due date of filing return
being 31/07/2022. His assessment would be completed
on 13/01/2023 with an assessed normal rate income of
Rs 7,47,540. He has a TDS credit of Rs 220 and paid
advance tax of Rs 46,400 in the F.Y. 2021-22.
Find out the interest payable u/s 234A
 234 B & 234 C is related with
Advance Tax payment
Sec 208 : If liability of payment of
tax after deducting T D S / T C S
is Rs.10,000 or more then the
assessee should pay such tax
through Advance tax
207(2) : Senior citizens having no
business or profession income
does not have adv. Tax liability
 INTEREST U/S 234B
For Non-payment or Short
payment of Advance Tax (i.e. 90%
of Assessed Tax)

 Rate - 1% per month / part of

month
 INTEREST U/S 234B
Period - (a) When no tax is paid on self-
assessment :
 Payable from 1st April of the A.Y.
till the date of determination of Income
u/s 143(1) , or the date of Regular
Assessment u/s 143(3) / 144 or first
Assessment u/s 147 / 153A.
 INTEREST U/S 234B
Period - (b) When tax is paid on self-
assessment
 i) Payable from 1st April of the A.Y. till the
date of submission of self-assessment tax
 ii) From the 1st day of the next month of the
submission of tax u/s 140A till the date of
determination of income u/s 143(1) , or the
date of Regular Assessment u/s 143(3) / 144
or first Assessment u/s 147 / 153A
 INTEREST U/S 234B
Amount –
(a) When no tax is paid on self-assessment : ASSESSED
TAX – (ADV. TAX +TDS + TCS + RELIEF U/S 90/91/90A + CREDIT
U/S 115JAA)
(b) When tax is paid on self-assessment :
i) Upto payment of 140A
ASSESSED TAX – (ADV. TAX +TDS + TCS)
ii) After payment of 140A
ASSESSED TAX – (ADV. TAX +TDS+ TCS +TAX PAID U/S 140A)
 Adjustment in the case of reassessment u/s
147/153A
Section 234B(3)
If the assessed tax is increased by the reassessment , the
assesssee will have to pay interest @1% for the period from
the date of 143(1)/143(3) upto the date of recomputation /
reassessment u/s 147/153A on the excess of tax determined
on recomputation / reassessment.
Section 234B(4)
As a result of various orders like u/s 154 / 250 / 254 / 260 /
262 / 263 /264 /245D(4) etc., if the interest is increased, the
A.O. shall serve a notice of demand. If decreased, the
excess interest paid , if any, to be refunded.
234C - Non-payment or Short-payment of
Advance Tax Installments
 Due dates of Advance tax payment u/s 211

 Four installments on 15th of June/ Sept/ Dec/Mar of

P.Y. @ 15%, 45% ,75% AND 100% OF ADV. TAX
PAYABLE

 INTEREST U/S 234C IS CALCULATED ON

RETURNED INCOME
 COMPUTATION OF INT U/S 234C
Circumstances Rate of Interest Period Amount on which
where Interest u/s Interest to is be
234C is Payable Calculated
If Advance Tax paid 15% of Tax due on
on or before 15th June @ 1% p.m. 3 months Returned Income –
of the P.Y.is less than TDS/TCS* as reduced
12% of Tax due on by Advance Tax paid
Returned Income till 15th June of P.Y.
If Advance Tax paid 45% of Tax due on
on or before 15th @ 1% p.m. 3 months Returned Income –
September of the TDS/TCS* as reduced
P.Y.is less than 36% by Advance Tax paid
of Tax due on till 15th September of
Returned Income P.Y.
If Advance Tax paid 75% of Tax due on
on or before 15th @ 1% p.m.` 3 months Returned Income –
December of the TDS/TCS* as reduced
P.Y.is less than 75% by Advance Tax paid
of Tax due on till 15th December of
Returned Income P.Y.
If Advance Tax paid 100% of Tax due on
on or before 15th @ 1% p.m.` Returned Income –
March of P.Y.is less TDS/TCS* as reduced
than 100% of Tax due by Advance Tax paid
on Returned Income till 15th March of P.Y.
 During the financial year 2021-22, m/s IQ ltd, a
company paid the following instalments of advance
tax :
 First installment of Rs. 25000 paid on 15/6/2021
 Second installment of Rs. 40000 paid on 16/09/2021
 Third installment of Rs. 100000 was paid on
15/12/2021
 Fourth installment of Rs. 35000 was paid on
21/03/2022
 the return was filed before due date. The assessment
under section 143(1) would be completed for A.Y.
2022-23 accepting the returned income of Rs. 720000.
calculate the interest chargeable under sections 234B
& 234C
Name of the assessee : IQ Ltd
Status : Company
Assessment year : 2022-23
*****************
Interest u/s 234B Rs
Tax on asssessed Income : 180000
Add cess 4% on Rs 180000 : 7200
Total taxability 187200

No liability of 234B as the “A” has paid Rs. 200000 as

advance tax which is more than 90 % of Rs 187200
Interest u/s 234C
As Assessed income is equivalent to Returned income, tax
liability is Rs 187200 again.
Date 15/6/21 15/9/21 15/12/21 15/3/22
Due 28080(22464) 84240(67392) 140400
187200
Paid 25000 25000 165000
165000
Shortfall NIL 59240 - 22200
Rounded NIL 59200 - 22200
Int NIL 1776 - 222

TOTAL INTEREST = Rs ( 1776+222 ) = Rs 1998

SUM : 6
 During the F.Y. 2021-22 Mr X ( Indv, 32 ) pays the
following installments of Advance Tax :
On Sep 15 2021 : 4800
On Dec 15 2021 : 11000
On Mar 15 2022 : 22000
On Mar 16 2022 : 10000
Mr X filed his return of income declaring total income
of Rs 701000/-. Assessment was made on
23.11.2022 making total income Rs. 726040. Find
out interest payable u/s 234B & 234C.
Name of the assessee : Mr X
Status : Individual
Assessment year : 2022 – 23
*****************
Interest u/s 234B Rs
Tax on asssessed Income (old) : 57708
Add cess 4% on Rs 57708 : 2308
Total taxability 60016
90% of Rs 60016 = Rs 54014 ; paid amount = Rs 47800
Shortfall = Rs ( 60016 – 47800 ) = Rs 12216 [ 12200 ® ]
Period of default = 8 months ( April 22 to Nov 22 )
So , interest U/s 234B = Rs ( 12200 * 1 % * 8 ) = Rs 976
Interest u/s 234C
Here returned income is Rs 701000, tax liability (old) is Rs
54808
Date 15/6/21 15/9/21 15/12/21 15/3/22
Due 8221(6577) 24664(19731) 41106 54808
Paid Nil 4800 15800 37800
Shortfall 8221 19864 25306 17008
Rounded 8200 19800 25300 17000
Int 246 594 759 170

TOTAL INTEREST = Rs ( 246+594+759+170 ) = Rs 1769

M ltd. files a return of income declaring an income
of Rs 440000 for the A.Y. 2022-23 The company is
entitled to tax credit of Rs 23000 on account of TDS.
The company has paid advance tax as under :
 On June 15, 2021 8000
 On Sept 15, 2021 36000
 On Dec 15 2021 30000
 On Mar 15 2022 27000
 Date of order 12/08/2023
Find out interest payable
u/s 234B.
 Name of the assessee : M/s. M Ltd
Status : Company
A.Y. 2022-23
*****************
Calculation of interest u/s 234C

Returned income Rs 440000

Tax on returned income Rs 110000 ( @ 25% )
Cess (Rs) 4400
Total tax liability Rs 114400
Less TDS Rs 23000
Balance Rs 91400
Due dates 15/06/21 15/09/21 15/12/21 15/03/22

Inst due (Rs) 13710 41130 84720 91400

(10968) (32904)
Amt paid (Rs) 8000 44000 74000
101000
Shortfall (Rs) 5710 nil 10720
nil
Shortfal ®(Rs) 5700 nil 10700
nil
Int U/s 234C (Rs) 171 nil 321 nil

Total Interest u/s 234C = Rs (171+321) = Rs 492

INTEREST U/S 234D
Refund granted u/s 143(1) is in excess of
Refund due on Regular Assessment.
Rate – 1/ % for every month or part
2
thereof.
Period – From the date of grant of refund
u/s 143(1) till the date of grant of refund
on Regular Assessment.
Amount - The excess refund issued to
assessee
INTEREST U/S 234E
Effective with effect from 01/07/2012.
Charged for delay in submitting
quarterly TDS/TCS returns.
Rate – Rs. 200 per day of default.

Period – quantum of such delay in days.

INTEREST U/S 234E
The maximum amount of interest can not
exceed the total TDS / TCS in question.

On and from 01/07/2012, no such return

is supposed to be submitted without the
fee mentioned.**
INTEREST / FEE U/S 234F
Fee for default in furnishing return of
income
Effective with effect from 01/04/2018.

Rate – Rs. 5000, if Total income exceeds

Rs 500000, else Rs 1000
INTEREST / FEE U/S 234G
Fee relating to statement or certificate of
donation
Effective with effect from 01/06/2020.
 Non production of Statement of donation
in Form 10BD and certificate of donation
in Form 10BE
Rate – Rs. 200 per day of default
INTEREST / FEE U/S 234H
Fee relating to intimation of AADHAR
number
Effective with effect from 01/04/2021
 Non-compliance of Section 139AA(2)

Rate – Rs. 1000

INTEREST U/S 220(2)
Non-payment of Tax, Interest, Penalty.

Rate - 1% (w.e.f. 08.09.2003) per month or

part of a month.

Period - Commencing from the date

immediately following the end of the period of
30 days from serving demand notice till the
date of payment thereof
Amount – Total amount of tax , interest or
penalty
 INTEREST U/S 201 (1A) OR 206 C(7)
Failure to Deduct / Deposit TDS./TCS
Rate - 1% p.m. ( from deductible date to date of
deduction )
1.5 % P.m. ( from date of deduction to date of
payment)
Evoked generally within 4 years
Speaking order is necessary
Amount – Amount of such T D S / T C S
 Interest payable to the Assesses
U/S 244A (Interest on Refund)
 NO INTEREST IS PAYABLE IF THE EXCESS PAYMENT
IS LESS THAN 10% OF TAX.
 Rate - 1/ % per month or part of a month on the amount
2
of refund.
 Period (A) If refund arises out of payment of TDS/
Advance Tax
(a) from 1st April of A.Y. till date of grant of refund
when return is submitted before the due date
(b) from the date of furnishing return till the date of
grant of refund when return is submitted
after the due date
Interest payable to the Assesses
U/S 244A (Interest on Refund)
(B) If refund arises out of payment of
self assessment tax u/s 140A
from the date of furnishing of return of
income or payment of tax, whichever is later, to the
date on which the refund is granted:
Amount – Tax paid minus Tax payable
U/S 132B(4) : on seized money
Amt : The amount seized or requisitioned ( - ) the
amount already released ( - ) the amount required to
meet all the existing liabilities.
Period : From the date next to that of expiry of 120
days from the date of execution of last authorization
for search u/s 132 or requisition u/s 132A to the date
of completion of assessment u/s 153A
Rate of interest : 0.5% per month or part of a month
RECAPITULATION OF
INTEREST UNDER
DIFFERENT PROVISIONS
OF INCOME TAX ACT.
 MCQ
Interest u/s 234B is calculated on Returned Income.
 A) True B) False.

Answer :B
 MCQ
If any assessee pays Advance Tax on 20th March of the
Financial Year, it is to be taken into consideration in
calculating interest u/s 234B and 234C.
 A) True B) False.
Ans : B (Only to be taken for calculating int.
u/s 234B)
 MCQ
Interest u/s 201(1A) relates to –
 A) Late filing of return B) Delayed refund
C) Default in collecting or depositing TDS
 D) None of the above.

Ans : C
 MCQ
Rate of interest u/s 234C –
 A) 1% B) ½% C) 2%
D) None of these.

Ans : A
 MCQ
Interest on excess refund is chargeable u/s –
 A) 234A B) 234C C) 244A
D)234D

ANS : D
 MCQ
As per provision u/s 208 of I.T. Act, Adv. Tax shall be
payable if –
 A) Rs 5000 or more.B) Rs 10000 or more
C) Rs 20000 or more D) None

Ans : B
 MCQ
• If no return is filed and the A.O. completes assessment
u/s 144, no interest u/s 234A is chargeable .
• A) True B) False.

• Ans : B
• (In this case period is to be counted from the due date
and upto the date of assessment u/s 144)
 MCQ
• The amount of Advance Tax payable by an assessee
on or before 15th sept/ P.Y. shall be –
• A) 45% of the Advance Tax payable
• B) 30% of the Advance Tax payable
• C) 12% of the Advance Tax payable
• D) None of the above

• Ans : A
 MCQ
Interest charged on delay in paying penalty is u/s
_____
 A) 234D B) 220(2)
C) 244A D) 132B(4).

Ans : B
 MCQ
Amount of refund must be how much % of assessed
tax at least, for attracting interest u/s 244A?
 A) 15 %.
 B) 10 % .
 C) 20 %
 D) 50 %.

Ans : B
 MCQ
Money seized in search operation can be kept without
conceding int. up to how many days ?
 A) 120 days.
 B) 4 months.
 C) 30 days.
 D) 1 year.

Ans : A
 MCQ
Advance tax liability of an assessee is Rs. 100000 /-.
Minimum amount of payment due on or before
15/09/p.y. from it not to charge int u/s 234C is _____
 A) 30000 /-.
 B) 15000 /-.
 C) 10000 /-.
 D) 36000 /-.

Ans : D
 MCQ
Which statement regarding Sec. 234A is true ?
 A) period of delay in filing return due to
departmental strike is condoned.
 B) period of delay in filing return due to books of
A/C being in the custody of the department is condoned.

 C) Mere delay in filing return only. i.e. no

financial incompliance can not attract interest.
 D) All of the above.

 Ans : D
 MCQ
The last Installment of Rs. 15000 /- of adv. Tax due on
15/03/2022 was deposited on 02/04/2022. In this case the
amount deposited :?
 A) shall be treated as adv. Tax but the “A” will have to
pay interest @ 1 % per month.
 B) shall not be treated as adv. Tax and no int. shall be
payable u/s 234C.
 C) Shall not be treated as adv. Tax and int. shall be
payable u/s 234C @ 1 % per month for 1 month.
 D) None of the above.

 Ans : C
 MCQ
Interest U/ S 234B is chargeable only if shortfall is
more than …….. ?
 A) 30%.
 B) 90%.
 C) 10%.
 D) None of the above.

Ans : C
 MCQ
Default in payment of Rs. 5555 /- by 4 months 3 days
would be rounded u/s 119A as follows :
 A) Rs. 5550 for 4 months.
 B) Rs. 5000 for 5 months.
 C) Rs. 5500 for 5 months.
 D) Rs. 5500 for 4 months.

Ans : C
 MCQ
The 2nd installment of advance tax of Rs. 15000 /- was
due by 15/09/21, the “A” deposited Rs. 10000 /- on
14/09/21 and balance on 20/11/21. In this case interest
will be payable on :
 A) Rs. 15000 /- for 3 months.
 B) Rs. 5000 /- for 3 months.
 C) Rs. 5000 /- for 2 months.
 D) None of the above.

Ans : B