Section 234C

Income Tax Department wants you to pay your Advance Tax in 4 installments to ease the burden of the tax. These installments must be paid on or before the due date. If you fail to do so, then tax department can impose interest penalty u/s 234C.

There are other similar interest penalties applicable under section 234A and section 234B.

Advance tax payments must be paid on the following dates of a financial year:

On or BeforeIn case of all taxpayers other than taxpayer opting for presumptive income u/s 44ADTaxpayers opting for presumptive income u/s 44AD
15th June15% of Assessed TaxNIL
15th September45% of Assessed TaxNIL
15th December75% of Assessed TaxNIL
15th March100% of Assessed TaxUp to 100% of advance tax payable

Interest

The interest for late payment is set at 1% simple interest on the amount of tax due, calculated from the individual cut-off dates shown above, till the date of actual payment of outstanding taxes.

Calculation of Interest under section 234C

A Tax Payer other than opting for presumptive income u/s 44AD

Advance Tax PaidRate of Simple InterestPeriod of InterestAmount on which Interest is calculated
On or before June 15 is less than 15% of the Amount*1% per month3 months15% of Amount* less tax already deposited before June 15
On or before September 15 is less than 45% of the Amount*1% per month3 months45% of Amount* less tax already deposited before September 15
On or before December 15 is less than 75% of the Amount1% per month3 months75% of Amount* less tax already deposited before December 15
On or before March 15 is less than 100% of the Amount*1% per month_100% of Amount* less tax already deposited before March 15

Here Amount on which Interest is calculated is the tax on total income less TDS less relief u/s 90 or 91 less tax credit u/s 115JD.

Note:

  • If the shortfall in payment of Advance Tax occurs due to capital gains or winning lottery, etc. then no interest is levied on the taxpayer.
  • The taxpayer has paid in full – tax payable on the income mentioned above, while paying remaining installments of advance tax due, or if no installments are due, the taxpayer pays them before the end of the financial year.

Example 

Consider that Aman total tax liability for this financial year is Rs. 100,000 and he paid Rs. 5,000 before 15th June, Rs. 25000 before 15th Sep, 35,000 before 15th December. He had some shortfall in every installment he paid. So by 31st of March, he paid total Rs. 53,000. The remaining Rs.50,000 was paid on 10th of July next year while filing the tax return.

If however, you made partial payments instead, you will be liable to pay interest as per the last column in the table below:

Payment DatesAdvance Tax payableTotal Advance Tax paidShortfall (Cumulative)Penalties (Cumulative)
15th June15,0005,00010,000@1% * 3*10,000 = 300
15th September45,00025,00020,000@1% * 3 *20,000=600
15th December75,00035,00040,000@1% * 3 *40,000=1200
15th March1,00,00050,00050,0001% * 1 *50,000=500


Total Interest Payable is  Rs 2600.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, Bulk Return or Revised Return Filing