Question

Example of calculation of interest u/s 220(2)

Answer 1

The AO passed an assessment order and raised a demand of Rs. 21.24 lakhs of which Rs. 10.50 lakhs was paid by the assessee and the balance of Rs. 10.94 was stayed. On 20.5.1998, the CIT (A) allowed the ap¬peal of the assessee and no demand remained payable by the assessee. The AO refunded the taxes paid by the assessee

Answer 2

U/S 220(2), interest is calculated as simple interest at the rate of 1% per calendar month. It can also be considered as interest on interest. Some instances of such calculations of interest are interest on late filing or payment and interest on late deduction. The payment has to be done within a month from the date of intimation.