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Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Interest Payable by the Assessee for default in furnishing Return of Income U/s 139(1)

Interest Payable by the Assessee for default in furnishing Return of Income U/s 139(1)
Interest Payable by the Assessee for default in furnishing Return of Income U/s 139(1)

The assessee is liable to pay interest in the following cases:

(a)        where the return of income is furnished after the due date.

(b)        where the return of income is not furnished by the assessee.

Rate of interest: Simple interest @ 1% per month or part of the month.
Period for which interest is payable: The interest will be payable for the period commencing on the date immediately following the due date and would end on:

in case of (a) above, the date of furnishing the return of income or in case of (b) above, date of completion of assessment u/s 144 (Best Judgment Assessment) or first time assessment, if done u/s 147 / 153A if there was no assessment made under section 144.

Amount on which interest is parable: Interest is payable on tax determined u/s 143(1) or on regular assessment under section 143(3)/I 44/or first assessment under section 147 / 153A (whichever section is applicable) if there was no assessment made under section 144 minus the following:

(1) Advance tax if any paid by the assessee,

(2) Tax deducted and collected at source,

(3) Any relief of tax allowed under section 89.

(4) The amount of relief of tax allowed under sections 90 and 90A and deduction from the Indian income-tax payable, allowed under section 91, and

(5) Tax credit allowed to be set off under section 11 5JAAJI 1 SJD from the tax on the total income.

Computation of Interest: Though the interest is payable on the balance tax determined as above, but any interest (computed as per the provisions of section 234A) paid under section 140A (relating to self assessment tax) on account of late filing of return shall be deductible [Section 234A(2)].

Thus, interest will be computed as under :

Step-I

Tax on total income determined under section 143(1) or on regular assessment under section 143(3) or 144 or on first assessment under section 147 or section 153A (whichever section is applicable) if not covered under section 143(1) or 143(3) or 144  
Less :    
(i) tax deducted/collected at source  
(ii) advance tax paid  
(iii) the amount of relief of tax allowed under sections 89, 90 and 90A and deduction from the Indian income-tax payable, allowed under section 91, and  
(iv) tax credit allowed to be set off under section 115JAA / 115JD from the tax on the total income.  
Amount on which interest is payable  
Interest payable shall be :
[Amount on which interest is payable X 1% X number of months]
   

Step-II

Deduct the interest (computed as per the provisions of section 234A) already paid under section 140A on account of late filing of return which must have been computed as under:

 

Tax on Total Income declared in the return of income  
Less:    
(i) tax deducted/collected at source  
(ii) advance tax paid  
(iii) the amount of relief of tax allowed under sections 89, 90 and 90A and deduction from the Indian income-tax payable, allowed under section 91, and  
(iv) tax credit allowed to be set off under section 115JAA / 115JD from the tax on the total income.
Amount on which interest is payable  

Interest paid under section 140A was computed as under:

Amount on which interest is payable computed as above X 1% X number of months

Interest computed under Step I — Step II shall be the balance interest payable under section 234A

[Section 234A(3)]- Interest for defaults in furnishing the return of income required by a notice U/s 148

Once the income has been determined under section 143(1) or the assessment has been done under section 143(3), 144 or 147 and the Assessing Officer issues a notice:

(i)      under section 148 for filing return of income for the purpose of reassessment / re-computation under section 147, or

(ii)     under section 153A for assessment in case of search or requisition, the assessee shall be liable to pay interest in the following cases:

(a)     when the return of income is furnished after the expiry of time allowed in the notice issued under section 148 or under section 153A; or

(b)          where no return of income is furnished by the assessee.

Rate of interest:         Simple interest @ 1% per month or part of the month.

Period for which interest is payable:             The interest will be payable for the period commencing on the date immediately following the expiry of rime limit given in the notice under section 48 or under section 153A and would end on:

In case of (a) above, the date of furnishing of return of income: or

In case of (b) above, date of completion of reassessment or re-computation under section 147 or reassessment under section 1 53A.

Amount on which interest is parable:           Interest is payable on the amount calculated as under:

(i)         Tax determined under section 147 or 153A
(ii) Less: tax on total income determined under section 143(1) or on assessment made under section 143(3), 144 or 147 earlier (whichever section is applicable)
Amount on which interest is payable
See also  Taxation of Cash Credit, Unexplained Money & Investments [Section 68 to 69D]
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