This document discusses interest payable by and to taxpayers in various situations under the Indian Income Tax Act. It covers interest charged for late filing of returns, late payment or underpayment of advance tax, excess refunds granted, and interest paid on amounts seized during a search that are eventually refunded. The key points covered include calculation methods for different types of interest, applicable rates, and time periods over which interest applies. Case laws are also referenced related to issues like what date should be used to determine interest and whether interest can be charged without being specified in the assessment order.

1. Interest
Payable/Receivable
by
Shankar Bose
Inspector of Income-tax
MSTU, Puri

2. There are tow Parts :
1. Interest payable by the Assessee,
2. Interest payable to the Assessee.
 Interest Payable by the Assessee by the assessee in the following cases :
 Intt. Payable by the Assessee
A. Interest for dafaults in furnishing of the return of income u/s 234 A,
B. Interest for defaults in payment of Advance tax u/s 234 B ,
C. Interest for deferment of payment of Advance Tax u/s 234 C,
D. Interest for granting of Excess refund. …u/s 234 D.
Interest When the assessee is deemed to be in default….. u/s 220(2).
 Interest for failure to deduct and Pay TDS….. u/s 201.
 Some case laws :
 140 A paid before Due date ; Return Submitted after due date :
--- Intt. u/s 234 A is not payable .
( Dr. Pranoy Roy V CIT [2002] 121 Taxman 314 ( Del) ]
 Intt. Must be charged in the asstt. Order.
“Charge Intt. As per law ” will not suffice.
[CIT V. Inchcape India (P) Ltd [2002] 124 Taxman 744( Del) ]
 Books of a/c with IT authority.
[ Intt u/s 234 A is not chargeable for delayed return ]
 Issue of notice u/s 142 (1) does not give the AO jurisdiction to levy intt. u/s 234 A.
[ CIT V Ranchi Club Ltd.[(2001) 114 Taxman 414 ( SC) ]
When Intt is payable Amt. On which intt. Is payable Rate of Int Period for
which intt. Is
payable
‘A’ failed to pay
Adv. Tax
Assessed Tax @ 1% for every month or part
of a month
From 1
st
April
of AY to dt of
143(1) or dt
of Regular
asstt.
Adv tax < 90 % of
Assessed Tax
Assessed Tax minus Adv Tax @ 1% for every month or part
of a month
From 1
st
April
of AY to dt of
143(1) or dt
of Regular
asstt.

3.  Cash seized during search should be treated as Advance Tax for the Purpose of computation of
Intt u/s 220(2) & sections 234 A,B,C.
[ Vipul D. Doshi V CIT (2001) 118 Taxman 30 ( Mum) ]
 Interest Payable to the Assessee :
1. On delayed refund ……… u/s 244A.
 Interest Payable to the Assessee :
2. 132B(4) ::
( Interest in respect of seized or requisitioned assets)
 234 A
 Default in Furnishing of Return of Income before due date :
 Rate of Interest : @ 1 % p.m. or part of a month.
Period : From Due date to date of Furnishing of the Return.
 When actually no Return has been furnished :
From Due date to Completion of assessment u/s 144
 Interest to be calculated on :
 Amount of tax determined u/s 143 (1)
Or
 when Regular Asstt. Has been made 
Tax assessed
[ Minus ]
(1) Advance Tax ,
(2) TDS/TCS ,
(3) Relief/Deduction of tax allowed u/s 90,90A,91 or any Tax Credit allowed to be Set Off u./s 115 JAA ,
115JD
234 B
 Intt for default for payment of Advance tax
 Assessed Tax : =
Tax on T.I. [u/s 143 (1)] / Regular assessment
MINUS
(1) TDS/TCS ,
(2) From AY 2007-08 any Relief/Deduction of tax allowed u/s 90,90A,91 or any Tax Credit allowed to be
Set Off u./s 115 JAA , 115JD
234 C
 Intt for Deferment of Advance tax::::
If ‘A’ Under estimated installments of advance Tax:
----Intt to be calculated as below :
 In case of non-corporate assessee

4. When 234 C payable ? @ of Intt Period of Intt Amt. on
which
intt. Is
payable
If Adv Tax paid
( before Sept 15)
< 30 % (a-b)
1% pm/part of a month 3 months 30 % (
a-b)-c
If Adv Tax paid
( before DEC 15)
< 60 % (a-b)
1% pm/part of a month 3 months 60%
(a-b)-d
If Adv Tax paid
( before MAR 15)
< 100 % (a-b)
1% pm/part of a month 100%
(a-b) -e
 a. : Tax returned by “a”.
 b. : TDS / TCS .
 c. : Adv. Tax Before SEPTEMBER 15.
 d. : Adv. Tax Before DECEMBER 15
 e. : Adv. Tax Before MARCH 15
 In case of corporate assessee
When 234 C payable ? @ of Intt Period of Intt Amt. on which intt. Is
payable
If Adv Tax paid
( before June 15)
< 12 % (a-b)
1% pm/part of a month 3 months 15 % ( a-b)-c
If Adv Tax paid
( before Sept 15)
< 36 % (a-b)
1% pm/part of a month 3 months 45% (a-b)-d
If Adv Tax paid
( before DEC 15)
< 75 % (a-b)
1% pm/part of a month 3 months 75% (a-b)-d
If Adv Tax paid
( before MAR 15)
< 100 % (a-b)
1% pm/part of a month 100% (a-b) –e

5.  a. : Tax returned by “a”.
 b. : TDS / TCS , etc.
 c. : Adv. Tax Before June 15.
 d. : Adv. Tax Before September 15
 e. : Adv. Tax Before December 15
 f. : Adv. Tax Before March 15
 Interest on Excess Refund
 234D : Interest on Excess Refund
 Section 234 D( applicable from June 01, 2003).
 Interest u/s 234 D is attracted in any of the Two cases :
1] Where Refund is granted u/s 143 (1) but no refund is due on regular assessment.
2] Where Refund is granted u/s 143 (1) But the refund so granted exceeds the amount
refundable on regular assessment
 Computation of Interest u/s 234D:
 Rate of Interest :: 0.5 % p.m. or part of a Month.
 Period for which intt. Payable :: From the date of grant of refund to the date of Regular
assessment
 Amount on which Intt. Is payable::
[Case1] : on Whole of amount.
[Case 2] : On the Excess amount refunded u/s 143(1) over the amount refundable on regular
assessment.
 201(1A), 220(2)
 TDS Default
 Default to 156 notice
 Interest Payable to the
Assessee ::
132B(4)-Interest Payable to the Assessee ::
1. 132B (4) :
Who shall pay : Central Government.
Rate of Interest : 0.5 % per month or part of a month.
 132 B ( 4) :Interest Payable to the Assessee ::contd.
 Period Involved : Calculated from the date immediately following the expiry of the period of
120 days from the date on which the last Authorization for Search u/s 132 or Requisition u/s
132A was Executed … To… the date of completion of assessment u/s 153 A or Chapter XIV-B(
Special Procedure for assessment of search cases.
 132 B (4)Interest Payable to
the Assessee ::contd.
 Amount on which interest to be paid :
Excess amount i.e. Amount seized or requisitioned
[ MINUS ]
Amount already Released [ MINUS ]

6. The amount required to meet all existing liabilities and liability determined on completion of
assessment.
• Interest Payable to the Assessee ::
• Section 244A
1. Refund out of TDS, TCS & Advance Tax.
244A(1)(a)
– Refund is not less than 10% of assessed tax. 244A(1)(a)
– Interest is to be given from the first day of the AY to the date of granting of refund.
2. Refund is out of tax other than
TDS/TCS/ADVANCE TAX.
-- Then intt is payable from the date of notice of Demand ( Or Assessment Order ) to the date of
signing of refund voucher.
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