Unfortunately currently there is no provision for such unusual income there is only provision for capital gain.
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How will interest be calculated for unusual revenues in last quarter of the financial year
I got a huge compensation through arbitral award in February 2020. I know that the Arbitral Award and certain Interest on the said award amount would be taxable in my bracket. But, there could be some huge penal interest as the system won't know the month in which the amount was received. The system would calculate the interest as if this was a normal business income spread throughout the year, but the payer did not pay the mandatory advance tax. How to avoid paying the interest on the unusual high amount earned only in last quarter of the FY ?
Asked 4 years ago in Income Tax
Dear Sir,
Hope you are doing well !!
It is advisable to take a phone consultation for detailed discussion.
Hi,
If its a business income, then you can't treat it differently. You will have to pay interest on shortfall. The differential treatment is allowed only with respect to the capital gain.
However, depending upon the other factors, interest can be reduced. Need ro discuss this over a call.
It is a payment related to the Trade dispute. In FY 2017-18, certain trade resulted in a loss which was shown as business loss in ITR-3 in that year and a part of the loss which could not be set off was carried forward. However, such trade was later disputed which resulted in a civil award by the court. The civil award was disbursed by the court in February 2020. Now, I have to show this award as a business receipt, adjust the b/f loss. But, even after adjustment, there would be huge taxable income from business. My only fear is, the penal interest which the system will calculate while filing the tax return as no quarterly advance tax was paid during the year. I paid the advance tax now, after receipt of the award from the court.
Asked 4 years ago
There is no way to avoid such penal interest
but you can file case again for recovery of interest from your parties
Hello,
You can't avoid the penal interest on such income. The more lenient provision are applicable to income such as Capital Gain Income.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
It would be considered as business income and interest on shortfall of advance tax would be levied.
Hi
Please share what all other incomes you have. There could be ways to avoid such interest on advance tax.
Dear Sir,
There is no way to avoid such penal interest.
It would be treated as business income and you need to pay the interest on shortfall.
Its a business income and you cant ignore the interest.
If it was a normal business order, i.e. say for example you receive a huge business order in march will you then also argue regarding interest.
If you are eligible for section 44AD you can show that and pay advance tax in March.
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