1. Facts of the Case
- Mr. X, an individual assessee, estimated his taxable income for the Financial Year (F.Y.) 2015–16 and computed a tax liability of ₹25,000 (excluding TDS).
- He paid only the 1st installment of advance tax before 15th September 2015.
- He failed to pay the remaining 2 installments, due on 15th December 2015 and 15th March 2016, respectively.
- Mr. X later paid the entire tax liability as self-assessment tax and filed his return on 15th December 2016, well after the due date (which was 31st July 2016 for non-audit cases).
- The case involves calculating interest under sections 234B, 234C, and 234A for default in tax payments and late filing.
2. Issues in the Case [Questions]
- What is the interest liability under Section 234C for deferment of advance tax installments?
- What is the interest liability under Section 234B for shortfall/non-payment of total advance tax?
- What is the interest liability under Section 234A for late filing of return?
- What is the total interest payable, and how should the assessee regularize the payment?
3. Legal Principles Covered
Section 234C – Interest for Deferment of Advance Tax
- Applicable when an assessee fails to pay advance tax by the prescribed due dates.
- Installment schedule:
- 15% by 15th June
- 45% by 15th September
- 75% by 15th December
- 100% by 15th March
- Since Mr. X paid only the first installment and missed the next two, interest is payable for shortfall on those dates.
- Interest Rate: 1% per month on the shortfall for 3 months each.
Section 234B – Interest for Non-payment or Short Payment of Advance Tax
- If the assessee has not paid 90% of total tax liability by 31st March, interest is payable from 1st April till the date of actual payment.
- Interest Rate: 1% per month or part thereof.
Section 234A – Interest for Late Filing of Return
- Due date for filing return for non-audit cases for AY 2016–17: 31st July 2016
- Actual filing date: 15th December 2016
- Delay: 4.5 months → treated as 5 months
- Interest Rate: 1% per month on net tax payable.
4. Possible Judgement and Interest Calculation
Let us assume:
- Total tax payable = ₹25,000
- TDS or other tax credits = ₹0 (not mentioned)
- Advance Tax Paid (1st installment): 15% of ₹25,000 = ₹3,750
- Balance tax paid with return: ₹21,250 on 15th December 2016
I. Interest under Section 234C:
- Due by 15th Dec (75%): ₹18,750
- Paid: ₹3,750
- Shortfall: ₹15,000
- Interest: ₹15,000 × 1% × 3 months = ₹450
- Due by 15th Mar (100%): ₹25,000
- Paid: ₹3,750
- Shortfall: ₹21,250
- Interest: ₹21,250 × 1% × 1 month = ₹212.50 ≈ ₹213
Total 234C interest = ₹450 + ₹213 = ₹663
II. Interest under Section 234B:
- Total unpaid tax till 31 March 2016 = ₹21,250
- Paid on: 15th December 2016
- Period: 1st April 2016 to 15th December 2016 = 9 months
- Interest: ₹21,250 × 1% × 9 = ₹1,912.50 ≈ ₹1,913
Total 234B interest = ₹1,913
III. Interest under Section 234A:
- Return due: 31st July 2016
- Filed on: 15th December 2016 → 5 months delay
- Tax paid on filing = ₹21,250
- Interest: ₹21,250 × 1% × 5 = ₹1,062.50 ≈ ₹1,063
Total 234A interest = ₹1,063
Final Summary of Interest Liability
| Section | Interest Amount |
|---|---|
| 234C | ₹663 |
| 234B | ₹1,913 |
| 234A | ₹1,063 |
| Total Interest | ₹3,639 |
Advisory & Final Judgement
- The assessee has defaulted on advance tax payments and late filing of return.
- Interest under Sections 234A, 234B, and 234C is automatically levied by CPC while processing returns.
- Assessee should ensure timely payments and return filings in future to avoid such penal interest.
- No penalty is levied automatically unless there is tax evasion or misreporting.
Tax Consultant Advice: Pay ₹3,639 as interest and ensure advance tax compliance going forward if estimated tax exceeds ₹10,000.
