The Central Board of Direct Taxes (CBDT) issued a draft circular clarifying that no interest under section 234A of the Income Tax Act should be charged on self-assessment tax paid before the due date for filing a tax return. Previously, interest was charged on self-assessment tax even if paid before the due date. The CBDT reviewed this after the Supreme Court ruled that interest under section 234A should only apply to tax amounts unpaid before the due date. Therefore, the CBDT decided that no interest will be charged under section 234A on self-assessment tax paid before the due date for filing a return.

1. Circular No. 2/2015 dated 10/02/2015
Initially, Interest u/s.234A was charged for the period of delay in filing of return,
though the entire tax may have been paid by way of self-assessment. Interest is basically
intended to compensate the revenue. When the entire tax liability has been paid fully
and the return is delayed due to circumstances such as non-availability of other
documents, illness of concerned persons, etc., the interest assumes the character of
penalty. If an assessee pays advance tax on or before 31st of March, he escapes the levy
of interest u/s.234A, whereas if the tax is paid on 1st April by way of Self-Assessment,
the interest u/s.234A is attracted if the return is not filed within the time prescribed in
S. 139(1). The fact that the self-assessment tax paid was ignored is unfair.
No interest U/ S 234A is chargeable on Self Assessment Tax Paid before
due date
DRAFT CIRCULAR NO. 2/2015 [F.NO.385/03/2015-IT(B), DATED 10-2-2015
The CBDT vide Draft Circular No. 2/2015 dated 10/02/2015 has clarified that No
interest u/s 234A is chargeable on Self-Assessment Tax paid before due date of filing of
return. Interest U/S 234A of the Income-tax Act, is charged in case of default in
furnishing return of income by the assessee.
The interest is levied on the amount of tax payable on the total income, as reduced by
the amount of advance tax, TDS/TCS at the specified rate. The interest is being charged
on the amount of Self-Assessment Tax paid by the assessee even before the due date of
filing of return as self-Assessment tax is not mentioned as a component of tax to be
reduced from the amount on which interest under section 234A of the Act is chargeable,
The CBDT has decided that no interest under section 234A of the Act is chargeable on
the amount of self-assessment tax paid by the assessee before the due date of filing of
return of income.
Interest under Section 234A of the Income-tax Act, 1961 is charged in case of default in
furnishing return of income by an assessee.

2. CALCULATION OF INTEREST
PARTICULARS AMOUNT
Net Taxable Income XXXX
Tax on Net Taxable Income XX
Less: Advance Tax Paid XX
Less: Tax Deducted at source XX
Less: Relief U/s 90/90A/91 XX
Less: MAT credit allowed to be set off u/s 115JAA/115JD XXXX
Amount XXX
Interest is charged on the left over Amount. We saw that Self – Assessment is not
reduced to calculate left over Amount on which is charged, Therefore Interest gets
charged on the amount of self-assessment tax paid by the assessee even before the due
date of filing of return.
Conclusion:
The CBDT has pointed out that in CIT vs. Prannoy Roy 309 ITR 231 (SC), the Supreme
Court has held that interest u/s 234A of the Act on default in furnishing return of
income shall be payable only on the amount of tax that has not been deposited before
the due date of filing the return for the relevant assessment year.
The CBDT has accordingly reviewed the present practice of charging interest u/s 234A
of the Act on self-assessment tax paid before the due date of filing the return of income.
The CBDT has decided that no interest u/s 234A of the Act is chargeable on the amount
of self-assessment tax paid by the assessee before the due date of filing the return of
income