Your Taxes

I have paid interest under Sections 234 B and C as shown by the system while filing returns. Now, CPC has sent a demand notice for additional interest. I want to know the details of interest calculation under these two sections. Now that the calculation has been found wrong, should I file rectification request or can I file revised return?

Venugopal

The Income Tax Act requires the assesses to discharge their tax liability by payment of advance tax over four instalments if the total tax net off taxes withheld exceeds ₹10,000.

Under Section 234 B, interest is payable on total tax liability as determined by the tax officer minus taxes withheld at source (net tax liability). Interest under Section 234 B is payable when the advance tax paid is less than 90 per cent of the net tax liability by March 31 of the previous year. Interest is payable at the rate of 1 per cent per month for each month or part thereof till remittance of taxes.

Interest under Section 234 C of the Act is payable on deferment/shortfall in instalment payment of advance tax and accrues till March 31 of the previous year. The deadlines for payment of advance tax are as follows: On or before June 15 — up to 15 per cent of advance tax payable; on or before September 15 — up to 45 per cent of advance tax payable; on or before December 15 — up to 75 per cent of advance tax payable; on or before March 15 — up to 100 per cent of advance tax payable.

Interest is payable at the rate of 1 per cent per month on the outstanding tax amount. Interest under Section 234 C is payable with reference to returned income. The Act allows relief from payment of interest under Section 234 C in case advance instalment payment is up to certain limits.

Also, assessees subject to presumptive taxation (Section 44 AD or Section 44 ADA of the Act), will be liable for interest under Section 234 C only if 100 per cent of the advance tax is not paid on or before March 15.

If the CPC order demanding additional interest is accurate, then you can pay the interest demand without filing any revised tax return.

I am an NRI and will be back in India by May 2018. Currently, I don’t pay any tax on interest earned through NRE FD. But, in future, I need to pay tax. To reduce the tax burden, I want to transfer part of my savings (~₹10 lakh) to my wife.Is it possible to transfer to my wife as a gift? Is the transferred amount taxable income for her? Is it better to transfer such amount while I remain an NRI?

Thanikavel

As per Section 56, any gift being a sum of money or an immovable asset transferred to a relative (includes spouse) is exempt from tax. Thus, there will be no tax liability in the hands of both the donor and the recipient. The position would not change even if you are a non-resident at the time of gifting. However, since the money was transferred to the spouse as a gift, in terms of Section 64, any interest earned on the amount by your spouse will be clubbed with your gross total income and is taxable in your hands.

The writer is Partner, Deloitte Haskins & Sells LLP. Send your queries to taxtalk@thehindu.co.in

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