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Under the
Income tax Act, 1961 the Chief Commissioner of Income tax and the Director
General of Income tax have the power to reduce or Waive interest charged
under Sections 234A, 234B and 234C of the Act. However, no reduction or
waiver of such interest shall be ordered unless the assessee has filed
the return of income for the relevant assessment year and paid the entire
tax due on the income as assessed except for the amount of interest for
which reduction or waiver has been requested for. The Chief Commissioner
of Income tax or Director General of Income tax may also impose any other
conditions deemed fit for the said reduction or waiver of interest.
There are
five classes of incomes or of cases in which reduction/waiver of interest
can be considered. Briefly these are as follows:
- Where
during the course of a search & seizure operation under section
132(1) of the Act, the books of accounts and other documents of the
assessee are seized and for reasons beyond the control of the assessee
he is unable to furnish the return of income for that year within the
specified time;
- Where
during the course of a search & seizure operations, cash is seized
and it is not allowed to be utilised for payment of the advance tax
instalment which falls due after the date of the seizure and as a result
the assessee is unable to pay the advance tax;
- Where
any taxable income other than 'capital gain' is received or accrued
after due date of payment of the first or subsequent instalment of advance
tax which was not anticipated by the assessee and the advance tax on
such income is paid in the remaining instalment or instalments (relevant
for interest under Section 234C);
- Where
any income which was not chargable to income tax on the basis of any
High Court order and on which the assessee did not pay Income tax and
subsequently in consequence of any retrospective amendment of law or
a Supreme court decision which has taken place after the end of such
previous year, in any assessment or reassessment proceedings, the advance
tax paid by the assessee during the financial year immediately preceding
the relevant assessment year is found to be is less than the amount
of advance tax payable on his current income (Relevant for interest
under Section 234B & 234C);
- Where
return of income could not be filed by the assessee due to unavoidable
circumstances and such return of income is filed voluntarily by the
assessee or his legal heirs, without detection by the assessing officer.
Section
234A: Interest for Defaults in Furnishing Return of Income :
Where the
return of income for any assessment year is furnished after the 'due date',
the assessee is liable to pay simple interest at the rate of 2% per month
on the tax on the total income till the date of filing the return. Where
no return is filed the same interest is charged till the date of completion
of the assessment under section 144.
Section
234B: Interest for Defaults in Payment of Advance Tax :
Where the
assessee has to pay advance tax and there is either a default on the part
of the assessee to pay the same or there is a default on the part of the
assessee in the sense that the specified percentages of advance tax are
not deposited before the specified dates, the assessee in such cases is
liable to pay penal interest under section 234B or 234C, as the case may
be. The interest for short payment of advance tax is calculated under
section 234B as under:-
- If the
assessee pays less than 90% of the total advance tax payable for the
year before the close of the previous year, simple interest @ 2% per
month or part thereof is chargeable w.e.f. Ist April of the Assessment
Year to the date of determination of income U/s 143(1) or to the date
of regular assessment on the assessed tax as reduced by any advance
tax paid.
Section
234 C: Interest for Deferment of Advance Tax :
Where the
assessee has to pay advance tax and there is either a default on the part
of the assessee in the sense that the specified percentages of advance
tax are not deposited before the specified dates, the assessee in such
cases is liable to pay penal interest under section 234C. The interest
for deferment of advance tax is calculated under section 234C as under:-
- In
the case of Corporate Assessee- If the advance tax paid by the
company on or before the 15th of June falls short of 15% of the total
advance tax payable for the year or if the advance tax paid by the company
on or before the 15th of September falls short of 45% of the total advance
tax payable for the year or if the advance tax paid by the company on
or before the 15th of December falls short of 75% of the total advance
tax payable for the year, the company shall be liable to pay simple
interest @ 1.5% per month for a period of three months in each case
on the amount of the shortfall in payment of tax. The companies are
also liable to pay interest if the advance tax paid on or before 15th
of March is less than the tax due on the returned income. However it
has been provided that if the advance tax paid by the company on its
current income on or before the 15th of June or 15th of September is
not less than 12% or, as the case may be, 36% of the tax due on the
returned income, the company shall not be liable to pay any interest
on the amount of shortfall by these dates.
- In
the case of non-Corporate Assessee- If no advance tax is paid
or the advance tax paid on or before 15th September is less than 30%
of the tax payable on the returned income as reduced by taxes deducted
at source, simple interest @ 1.5% p.m. is chargeable on the amount of
the shortfall for a period of 3 months.If
no advance tax is paid or if the advance tax paid on or before 15th
December is less than 60% of the tax payable on the returned income
as reduced by taxes deducted at source, simple interest @ 1.5% p.m.
is chargeable on the amount of such shortfall for a period of 3 months.
If the advance tax paid by the assessee on his current income on or
before 15th of March is less than the tax due on the returned income,the
assessee is liable to pay simple interest @ 1.5% on the amount
of such shortfall.
Interest
is not leviable if the shortfall in the payment of advance-tax if it is
on account of
- under
estimation of or failure to estimate the amount of capital gains
- income
from winnings from lotteries, crossword puzzles, races, card games,
gambling, betting etc.
- However
this benefit of non charging of interest is available if the assessee
pays the whole of the tax payable in respect of these incomes in the
remaining instalments of advance tax which are due or if no such instalment
is due, by the 31st day of March of the financial year.
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