Interest for defaults in payment of advance tax [Section 234B] under Scheme of Mandatory Interest :

1. The assessee will be liable to pay interest at the rate of 1% for every month or for part of month for the period starting from 1st April of the following financial year to the date of regular assessment on the amount of tax on the total income as determined under section 143(1) or on regular assessment after giving credit for any advance tax paid, tax deducted at source and collected at source, if the advance tax paid falls short of 90% of the ‘assessed tax‘.

2. Meaning of the term ‘assessed tax’: The tax on the total income determined under section 143(1) or on regular assessment as reduced by the amount of –

(i) any tax deducted or collected at source on any income which is taken into account for calculating the total income.

(ii) any relief of tax allowed under section 90 or 90A;

(iii) any deduction of tax allowed under section 91;

(iv) any tax credit allowed to be set-off in accordance with the provisions of section 115JAA or section 115JD.

3. An assessment made for the first time under section 147 shall be deemed to be regular assessment.

4. Tax on the total income determined under section 143(1) shall not include the additional income-tax, if any, payable.

5. Where before the date of determination of total income under section 143(1) or completion of regular assessment, tax is paid by the assessee under section 140A, interest shall be calculated up to the date on which the tax is so paid and reduced by the interest paid under section 140A.

Thereafter, interest shall be calculated on the amount by which the tax paid under section 140A together with the advance tax paid falls short of the assessed tax.

6. Where an application under section 245C(1) for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of a month comprised in the following period:

Period commencing from:	and	Period ending on:
the 1st April of such assessment year		the date of making such application
Amount on which interest is payable:
the additional amount of income-tax referred to in section 245C(1)

Further, where as a result of an order of the Settlement Commission under section 245D(4) for any assessment year, the amount of total income disclosed in the application under section 245C(1) is increased, the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of a month comprised in the following period –

Period commencing from:	and	Period ending on:
the 1st April of such assessment year		the date of order under section 245D(4)
Tax on total income determined on the basis of order under section 245D(4)
minus
Tax on total income disclosed in the application filed under section 245C(1).

 

If, as a consequence of an order passed by the Settlement Commission under section 245D(6B) to rectify a mistake apparent from the record, the amount on which interest is payable is increased or decreased, the interest shall be increased or decreased accordingly.

7. As per section 234B(3), where the total income is increased on reassessment under section 147 or section 153A, the assessee shall be liable for interest@1% for every month or part of a month on the amount of the increase in tax on total income as a consequence of reassessment or recomputation [Tax on total income determined on the basis of reassessment or recomputation – Tax on total income determined under section 143(1) or on the basis of regular assessment].

Period for which interest is payable

Period commencing from:	and	Period ending on:
the 1st April next following the financial year		the date of reassessment or recomputation under section 147 or section 153A.

8. Where as a result of an appellate order, an order of revision or an order from Settlement Commission, the interest payable is increased or reduced, the Assessing Officer shall serve a notice of demand on the assessee where the interest is increased, and where the interest is reduced, the excess interest paid shall be refunded.