# How to calculate interest under section 234B and 234C

In our last article we have discussed due dates for payment of advance tax and what happens when advance tax is not paid on or before the due date. In this article, we will be discussing how to calculate interest under section 234B and 234C.

If for a financial year, tax liability of an assessee is Rs 10,000 or more then tax department in India required them to pay advance tax in installments on or before the due dates.

This means, all assessee including freelancers, self employed businessmen, salaried employees and corporate are required to pay advance tax where the tax liability of the financial year is Rs 10,000 or more.

If you are salaried and your taxable income during the financial year is largely from salary income, it is likely all your taxes have been taken care of by TDS (tax deducted at source). Other than salary income, if you have earned income under any other head (like rent income or income from business or profession) which is liable to tax then you may liable to pay advance tax.

For calculation of advance tax part of a month is rounded off to a full month.

While calculating interest, advance tax is also rounded off in such a way that any fraction of a hundred is ignored.

If short payment of advance tax is due to retrospective amendments in tax law or because of subsequent court ruling, interest under section 234B cannot be imposed.

## Calculation of Interest under Section 234B – Applicable to Individual

 Amount in Rupees Remarks Tax liable 81,576 Less: TDS (12,510) Assessed tax (81576-12510) 69,066 90% of assessed tax (90% of 69066) 62,159 Advance tax paid during FY 2014-2015 On September 15th 2014 4,800 On December 15th 2014 11,000 On March 15th 2015 18,000 On March 16th 2015 22,000 55,800 55,800 Shortfall ( Assessed tax minus advance tax) 13,266 Since advance for the financial year is less than 90% of the assessed tax, The person is liable to pay interest under section 234B of Income tax act @ 1% simple interest. Round off 13,200 rounded off to nearest 100 Date of assessment order 20th January of the assessment year April to January 10 months Interest u/s 234B (13200*1%*10) 1,320

## Calculation of Interest under Section 234C – Applicable to Individual

 Assessed Tax 76,426 Less: TDS (12,510) Assessed Tax after TDS 63,916 30% of Assessed Tax 19,175 Interest Calculation U/S 234C On September 15th 2014 On December 15th 2014 On March 15th 2015 Instalment Payments 4,800 15,800 33,800 Advance tax liability 19,175 (30% of 63916) 38,350 (60% of 63916) 63,916 (100% of 63916) Shortfall 14,375 (19175-4800) 22,550 (38350-15800) 30,116 (63916-33800) Rounded of amount as per rule 119A 14,300 22,500 30,100 Rate of Interest u/s 234B 1% per month 1% per month 1% per month Period of default 3 3 1 Amount of interest 429 (14300*1%*3) 675 (22500*1%*3) 301 (30100*1%*1) Total Interest Payable U/S 234C 1,405 (429+675+301)

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## One thought on “How to calculate interest under section 234B and 234C”

1. CS Muralidharan says:

Whether fees paid to an auditor for preparing and filinfg IT Return can be claimed as exemption?