Rule 269: Rounding rules for calculating interest under the Act
Rule 269, made for section 533(2)(u), lays down three rounding rules for working out interest payable by an assessee or by the Central Government to an assessee under any provision of the Act. For interest calculated on an annual basis, fractions of a month are ignored. For interest calculated for every month or part of a month, a fraction of a month counts as a full month. The amount on which interest is calculated is rounded off to a multiple of Rs 100, ignoring any fraction of Rs 100.
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Rule 269 - Procedure to be followed in calculating interest under section 533(2)(u)
In calculating the interest payable by the assessee or the interest payable by the Central Government to the assessee under any provision of the Act,—
(a) where interest is to be calculated on annual basis, the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated;
(b) where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month and the interest shall be so calculated; and
(c) the amount of tax, penalty or other sum, in respect of which such interest is to be calculated, shall be rounded off to the nearest multiple of ₹ 100 rupees and for this purpose any fraction of ₹ 100 shall be ignored and the amount so rounded off shall be deemed to be the amount in respect of which the interest is to be calculated.
Rule breakdown
Three rounding rules
Annual-basis interest: round the period to whole months and ignore any fraction of a month (Rule 269(a)).
Monthly or part-month interest: treat any fraction of a month as a full month (Rule 269(b)).
Amount of tax, penalty or other sum: round to a multiple of Rs 100 and ignore any fraction of Rs 100 (Rule 269(c)).
Who it applies to
Interest payable by the assessee.
Interest payable by the Central Government to the assessee.
Under any provision of the Act.
Key takeaways
Part months
Ignored for annual interest; counted in full for monthly interest.
Rs 100 rounding
The base amount is rounded off with fractions of Rs 100 ignored.
Both directions
Applies to interest payable by and to the assessee.
Practical checklist
- Check which method the interest provision uses: annual basis or every month or part of a month.
- Round the base amount before applying the rate.
Avoid
- Do not count a part-month as a full month where interest is on an annual basis.
FAQs
How is a part-month treated for monthly interest?
As a full month (Rule 269(b)).
How is a part-month treated for annual interest?
It is ignored (Rule 269(a)).
How is the amount rounded?
To a multiple of Rs 100, ignoring any fraction of Rs 100 (Rule 269(c)).
Glossary
- Part of a month
- A period shorter than a full month, counted as a full month where interest is for every month or part of a month.
- Section 533(2)(u)
- The rule-making provision under which Rule 269 is framed.