Interest Imposed by the I-T Department – Section 234C
Interest Imposed by the I-T Department – Section 234C
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Income Tax Department strives to make it as easy and convenient for citizens to comply with advance tax payments. So, one has the option of paying it in 4 instalments over the financial year. However, if you still default, there are some consequences in the form of interest penalty. Basically, Section 234C deals with interest to be levied on defaulters of Advance Tax Instalment Payments. This is the last part in a 3-part series about Interest imposed by the IT Department.
Read our previous guides on Section 234A and Section 234B.
Part III: Section 234 C
(Interest for Deferred Payment of Advance Tax)
1. Due dates for paying Advance Tax
The Income Tax department expects you to pay your taxes on time , otherwise you will be charged interest for late payment, at the time of filing your returns.Advance tax is paid on the following dates of a financial year:
On or Before
In case of all taxpayers other than taxpayer opting for presumptive income u/s 44AD
Taxpayers opting for presumptive income u/s 44AD
15th June
Up to 15% of advance tax payable
NIL
15th September
Up to 45% of advance tax payable
NIL
15th December
Up to 75% of advance tax payable
NIL
15th March
Up to 100% of advance tax payable
Up to 100% of advance tax payable
2. Interest
The interest for late payment is set at 1% on the amount of tax due. It is calculated from the individual cut off dates shown above, till the date of actual payment of outstanding taxes.Calculation of Interest under section 234C – In case of a Taxpayer other than the one opting for presumptive income u/s 44AD
Rate of Interest
Period of Interest
Amount on which Interest is calculated
If Advance Tax paid on or before June 15 is less than 15% of the Amount*
Simple interest @1% per month
3 months
15% of Amount* (-)tax already deposited before June 15
If Advance Tax paid on or before September 15 is less than 45% of the Amount*
Simple interest @1% per month
3 months
45% of Amount* (-) tax already deposited before September 15
If Advance Tax paid on or before December 15 is less than 75% of the Amount*
Simple interest @1% per month
3 months
75% of Amount* (-) tax already deposited before December 15
If Advance Tax paid on or before March 15 is less than 100% of the Amount*
Simple interest @1% per month
–
100% of Amount* (-) tax already deposited before March 15
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*Amount on which percentage of advance tax needs to be calculated = Tax on total income (-) TDS (-) relief u/s 90 or 91 (-) tax credit u/s 115JD
Note that no interest is payable if there is any shortfall in payment of advance tax due, if it is on account of underestimation or failure to estimate amount of capital gains or speculative income (lottery income, gambling income etc).
If it is on account of underestimation or failure to estimate amount of capital gains or speculative income (lottery income, gambling income etc) AND
The taxpayer has paid in full , the tax payable on the income mentioned above, while paying remaining installments of advance tax due, or if no installment is due, tax payer pays them before the end of the financial year
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Consider that your total tax liability for this financial year is Rs. 100,000 and it needs to be paid in installments as explained above. Assume there is no TDS here.If you made partial payments instead, you will be liable to pay interest as per the last column in the table below:
Payment Dates
Advance Tax payable
Total Advance Tax paid
Shortfall (Cumulative)
Penalties (Cumulative)
15th June
15,000
5,000
10,000
@1% * 3*10,000 = 300
15th September
45,000
25,000
20,000
@1% * 3 *20,000=600
15th December
75,000
35,000
40,000
@1% * 3 *40,000=1200
15th March
1,00,000
50,000
50,000
1% * 1 *50,000=500
Total interest Payable is Rs 2600.Remember, ClearTax automatically calculates the interest under Section 234 for you based on the amounts you enter and the dates.
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