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Section 234B - Interest for default in payment of Advance Tax

Every taxpayer (other than Senior Citizen not having business income) is liable to pay advance tax if the total tax payable is Rs.10000/- or more for the Financial year after deduction of TDS/TCS etc.

If the Advance Tax is not paid in time, there are two types of Interest chargeable under Income Tax Act. These are covered under Section 234B and 234C.

Here in this article we look at the provisions relating to Section 234B of the Income Tax.

Who is liable to pay Interest under Section 234B

  1. Any taxpayer who has failed to pay the advance tax or has paid less than 90% of advance tax is liable to pay interest u/s 234B.

  2. Senior & Super Senior Citizens are liable to pay interest u/s 234B only if they have income under head Business or Profession.

How is the interest u/s 234B calculated and on what amount

  1. Interest u/s 234B is calculated on total assessed tax (i.e. tax determined u/s 143(1) or Section 143(3) i.e. regular assessment) less any TDS/TCS, relief u/s 89, 89A, 90, 91 or tax credit allowed u/s 115JAA or 115JD.

  2. Interest u/s 234B is payable on above calculated amount @ 1% for every month or part of the month starting from 1st April i.e. after the end of the Financial year upto the date of assessment or regular assessment.

  3. If any Self Assessment tax is paid after the end of the Financial year, the interest u/s 234B is calculated upto the date of payment of self assessment only. (if the same is paid in full). However, if any tax remains after the payment fo self assessment tax, the interest u/s 234B continues on the balance amount till the date of assessment.

For Example,

Mr. Anil who is a businessman is having total tax liability of Rs.250000/- for the F.Yr.2020-21. He has paid TDS of Rs.110000/- and advance tax of Rs.90000/- till 31st March,2021. Calculate the interest u/s 234B to be paid by him if he had paid the balance tax of Rs.50000/- on 31st Dec.2021 assuming that the interest is also paid alongwith the balance tax.

In this case, The total tax liability of Mr. Anil for the F.Yr. 2020-21 is Rs. 250000/-

Less :TDS and Advance tax paid upto 31-3-2021 Rs. 200000/-

Net tax payable by Mr. Anil Rs. 50000/-

Interest u/s 234B i.e. from 1st April,21 to 31st Dec.21 will be

Rs.50000/- * 1% per month * 9 months Rs. 4500/-

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