Advance Tax

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vinod kumar pal (Querist)
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13 April 2017 Dear sir can u tell me please how can i calculate Advance Tax and if fail to pay how can be calculate interest on tax u/s 234A, 234B,234C please explain with example thank you

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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13 April 2017 Advance tax for assessees other than company is to be paid in following manner

- Before 15th September - 30% of Advance Tax (i.e 30% of tax Liability)
- Before 15th December - 60% of Advance Tax (i.e 30% of tax Liability)
- Before 15th March - 100% of Advance Tax (i.e. balance 40%)

First you have to estimate your full year income and then calculate tax as per relevant rates and above installments are paid on the basis of estimated tax. For Eg : Suppose your Estimated total tax liability is Rs. 100000 then installments are as follow:
- On or before 15th September - 30000
- On or before 15th December - 30000
- On or before 15th March - 40000

> Interest under section 234A – Default in furnishing the return of Income:
If the assessee has not filed his return of income within the time limit prescribed, he shall pay simple interest @ 1% for every month or part of a month. It is calculated from the due date to date of furnishing the return. Example: A company files its return on 10th December. Due date under the Act is 30th September.
For Eg: Suppose the tax payable by the company is Rs.100000. Interest will be calculated as follows:
Tax = 100000
Delay = 3 months ie Oct, Nov, Dec.
Interest = 100000*3%= Rs.3000

Interest under section 234B- Default in payment of Advance Tax:
If an assessee has to pay advance tax and he has not paid such tax or if the advance tax paid by him is less than 90% of the assessed tax, he shall pay simple interest @ 1% every month or part of a month. It is calculated from April 1st of the next financial year to date of determination of total income under Section 143(1). But, if regular assessment u/s. 143(3) is completed, then interest is chargeable up to the date of regular assessment. Interest shall be calculated on the amount equal to the assessed tax in case no advance tax is paid, or on the amount by which the advance tax paid falls short of the assessed tax.
Example: Mr. A has a tax liability of Rs.300000. TDS = Rs.50000
Advance tax payment details are as follows:
15th Sept 2011 Rs.30000
15th Dec 2011Rs.50000
15th Mar 2012 Rs.55000
Total Rs.135000
Interest u/s 234B is calculated as follows:
Tax on income Rs.300000
Less: TDS Rs.50000
Assessed tax Rs.250000
90% of assessed tax = 250000*90% = 225000
But Advance tax paid = Rs.135000
Hence 234B is attracted.
Shortfall = 250000-135000= Rs.115000 (Shortfall means difference between assessed tax and advance tax paid). Interest under section 234 B = 115000*1%*4 months (Apr-July) = Rs.4600

Interest under section 234C – Deferment of Advance tax
Section 234C is very simple. If the advance tax paid is in underestimated instalments or if it s not paid at all, Section 234C gets attracted. Interest is calculated on the difference between the instalment paid and instalment payable. This is how interest is calculated: 1% p.m. for a period of 3 months for every deferment. But, for last instalment on 15th March, interest would be 1% for 1 month only.