Interest for Default in payment of Advance Tax instalment
(Section 234C of The Income Tax Act)
Section
234C of the Income Tax Act imposes a penal interest in case of
default in payment of advance tax instalments. If the due instalments
of advance tax is not paid/short paid,
interest under section 234C will
be levied.
- Interest @1% for a month
or part of a month is
to be levied for default in payment of instalments of Advance Tax
subject to certain conditions as per the table below.
Rules
of Section 234C for default in Advance Tax instalment for All Assessees
(From
AY 2017-18 (FY 2016-17) all assessees have same rules for advance tax
& thus penal interest on all assessees is same)
| Due Dates |
Advance Tax Payable |
Applicable
Interest |
On or before 15th
June
|
15% of Advance Tax
|
1% interest leviable for 3 months if advance tax paid is less then 12%
of the advance tax payable
|
| On or before 15th September |
45% of Advance Tax |
1% interest leviable for 3 months if advance tax paid is less then 36%
of the advance tax payable
|
| On or before 15th December |
75% of Advance Tax |
1% interest leviable for 3 months if advance tax paid is less then 75%
of the advance tax payable
|
| On or before 15th March |
100% of advance tax |
1% interest leviable if advance tax paid is less then 100% of the
advance tax payable
|
Rules of Section 234C for default in Advance Tax
instalment for
individuals
(tax payers other then companies - applicable
only till financial year 2015-16(AY 2016-17)
| Due Dates |
Advance Tax Payable |
Applicable
Interest |
| On or before 15th September |
30% of advance tax |
1% interest leviable for 3 months if advance tax paid is less then 30%
of the advance tax payable
|
| On or before 15th December |
60% of advance tax |
1% interest leviable for 3 months if advance tax paid is less then 60%
of the advance tax payable
|
| On or before 15th March |
100% of advance tax |
1% interest leviable for 1 month if advance tax paid is less then 100%
of the advance
tax payable
|
Other Important
Points:
- Interest u/s 234C is not leviable if the shortfall in
payment of
Advance Tax instalment is due to Capital Gains or Winnings from Lottery
etc. and the taxpayer pays the required amount of tax on such incomes
with the next instalment & if no instalment is due till 31st March
of the year.
- The
amount of tax on which penal interest is to be calculated shall be
rounded off to nearest multiple of Rs.100. For example if interest is
to be calculated on Rs. 9894, interest will be calculated on Rs. 9900.
- For
calculation of interest any part of month shall be treated as whole
month. For example if the delay in furnishing return is of 5 months and
10 days, interest will be calculated for 6 months.
- From
the Assessment Year 2017-18 interest under section 234C shall not be
chargeable in case of an assessee having income under the head "Profits
and gains of business or profession" for the first time subject to
certain specified conditions.
- How to avoid
Interest u/s 234C?
- Salaried
people may avoid this interest
by declaring their other incomes to their employers. Employer will
deduct due tax on such incomes as TDS. As all taxes would already have
been deducted there will be no default/short payment of advance tax.
Some Quick links:
How
to make online payment of advance tax?
Due
Dates for Advance Tax payment
Calculation
of Advance Tax
Interest
u/s 234A for delay in filing return
Interest
u/s 234B for default in payment of Advance Tax
How to pay Self Assessment
Tax
|
