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How is 234C interest calculated

How is 234C interest calculated

Interest is charged at the rate of 1% simple interest for the period of delay for each instalment on the amount that is short paid. Fractions of hundreds are ignored and days are rounded off to a month. Here is how it is calculated.

 

Interest on first instalment

This interest is applicable when advance tax paid on or before 15th September is less than 30% of (a-b)

Interest calculation = 30% (a-b)-c x 3 months x 1%

a is total tax on income in the return.

b is sum of (TDS + relief claimed under section 90 or 90A or 91 + tax credit under section 115JD)

c is advance tax paid on or before September 15

 

Interest on second instalment

This interest is applicable when advance tax paid on or before 15th December is less than 60% of (a-b)

Interest calculation = 60% (a-b)-d x 3 months x 1%

 

d is advance tax paid on or before December 15

How is 234C interest calculated

Interest on third instalment

This interest is applicable when advance tax paid on or before 15th March is less than 100% of (a-b)

Interest calculation = 100% (a-b)-e x 1%

e is advance tax paid on or before March 15

 

Example

Rohit had a total tax payable of Rs 333,564 of which Rs 253,280 had already been deducted at source (TDS). Rohit made the following payments towards advance tax Rs 11,000 on 15thSeptember and Rs 29,000 on 15th March.

Interest on First Instalment

Rs 333,564 – Rs 253,280 = Rs 80,200. (fraction of hundred has to be ignored)

30% of Rs 80,200 = Rs 24,000 whereas advance tax paid is Rs 11,000 before 15th September

Therefore interest under section 234C = 30 %( Rs 333,564 – Rs 253,280) – Rs 11,000 x 1% x 3 months = Rs 390

 

How is 234C interest calculated

Interest on Second Instalment

Rs 333,564 – Rs 253,280 = Rs 80,200. (fraction of hundred has to be ignored)

60% of Rs 80,200 = Rs 48,100 whereas advance tax paid is Rs 11,000 before 15th December

Therefore interest under section 234C = 60 %( Rs 333,564 – Rs 253,280) – Rs 11,000 x 1% x 3 months = Rs 1113

 

Interest on Third Instalment

Rs 333,564 – Rs 253,280 = Rs 80,200. (fraction of hundred has to be ignored)

100% of Rs 80,200 = Rs 80,200 whereas advance tax paid is Rs 40,000 (Rs 11,000 + 29,000) before 15th March

Therefore interest under section 234C = 100 %( Rs 333,564 – Rs 253,280) – Rs 40,000 x 1% = Rs 403

How is 234C interest calculated

Total Interest charged under section 234C = Rs 390 + Rs 1113 + Rs 403 = Rs 1906

Therefore Rohit has to pay an interest of Rs 1,906 under section 234C along with his tax dues.

How is 234C interest calculated

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How is 234C interest calculated

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