Problems on Section 234(A) 234(B) 234(c)

Sections 234A, 234B, and 234C of the Income Tax Act, 1961, in India, deal with interest penalties applicable for various non-compliance issues related to the filing of income tax returns and payment of taxes. Understanding how these sections apply requires knowing the specific conditions under which interest penalties are imposed.

Section 234A: Interest for Default in Furnishing Return of Income

Under Section 234A, interest is charged for the delay in filing the income tax return (ITR) past the due date. The interest is calculated at 1% per month or part thereof, on the outstanding tax amount. The calculation starts from the due date of filing the return till the date when the return is actually filed.

Problem on Section 234A:

Assume the tax payable by Mr. A is ₹50,000, and the due date for filing the return was July 31, 2023. If Mr. A files his return on December 15, 2023, calculate the interest under Section 234A.

Solution:

Delay in filing = 4 months and 15 days (August, September, October, November, and 15 days of December)

Since part of a month is considered as a full month, the delay is considered as 5 months.

Interest = 50,000 * 1% * 5 = ₹2,500

Section 234B: Interest for Default in Payment of Advance Tax

Section 234B applies when a taxpayer has failed to pay at least 90% of the tax payable through advance tax by the end of the financial year. Interest is calculated at 1% per month or part thereof, on the assessed tax minus the advance tax paid.

Problem on Section 234B:

Suppose Mr. B’s total tax liability for the financial year was ₹1,00,000, and he paid an advance tax of ₹80,000. Calculate the interest under Section 234B if he pays the remaining tax on June 15, 2023.

Solution:

Since the advance tax paid is less than 90% of the total tax liability, Section 234B applies.

Assessed tax = ₹1,00,000

90% of assessed tax = ₹90,000

Advance tax paid = ₹80,000

Shortfall = ₹90,000 – ₹80,000 = ₹10,000

Interest is calculated from April 1, 2023, to June 15, 2023 = 3 months

Interest = 10,000 * 1% * 3 = ₹300

Section 234C: Interest for Deferment of Advance Tax

Section 234C deals with interest charged for the deferment of advance tax installments. If advance tax installments are not paid in accordance with the specified percentages by the due dates, interest is charged at 1% per month or part thereof for a period of 3 months for the first three installments and 1 month for the last installment on the shortfall amount.

Problem on Section 234C:

Assume Mr. C’s total tax liability for the financial year was ₹1,20,000. The due dates for advance tax payments and the percentage of tax required to be paid were as follows:

• By June 15: 15% of the total tax liability
• By September 15: 45% of the total tax liability (cumulative)
• By December 15: 75% of the total tax liability (cumulative)
• By March 15: 100% of the total tax liability (cumulative)

Mr. C paid ₹10,000 by June 15, ₹40,000 by September 15, ₹70,000 by December 15, and the remaining ₹50,000 by March 15.

Calculate the interest under Section 234C.

Solution:

For June 15: Required to pay = 15% of 1,20,000 = ₹18,000 Paid = ₹10,000 Shortfall = ₹8,000 Interest for 3 months = 8,000 * 1% * 3 = ₹240

For September 15: Required to pay = 45% of 1,20,000 = ₹54,000 Paid cumulatively = ₹40,000 Shortfall = ₹14,000 Interest for 3 months = 14,000 * 1% * 3 = ₹420

For December 15: Required to pay = 75% of 1,20,000 = ₹90,000 Paid cumulatively = ₹70,000 Shortfall = ₹20,000 Interest for 3 months = 20,000 * 1% * 3 = ₹600

For March 15, since Mr. C paid the remaining amount, there’s no interest applicable for deferment for this period.

Total Interest under Section 234C = ₹240 + ₹420 + ₹600 = ₹1,260

These examples illustrate how interest under Sections 234A, 234B, and 234C is calculated based on different types of non-compliance with tax payment and filing obligations. Calculations will vary based on the actual dates and amounts involved.