Section 234 of the Income Tax Act.
Default in filing of Tax Return – Section 234A
Default in payment of Advance Tax – Section 234B
Deferment of Advance Tax – Section 234C
Default in filing of Tax Return – Section 234A
If you have unpaid taxes that are outstanding and you have not filed your returns by the due date, you are in for trouble.
You will be charged an interest amount of 1% per month (simple interest) on the tax amount outstanding. This interest will be calculated from the due date applicable to you for filing of return of the applicable year till the date that you actually file your return.
Illustration:
Let’s say that your total tax outstanding is Rs 1,00,000 (net of advance tax paid & TDS if any) and you file your return on the 15th December instead of 5th August of the assessment year, when you were actually supposed to file your return. You are now 5 months late in your tax payments. (The 15 day period in December is treated as a month).
Interest = 100,000 x 1% x 5 = Rs. 5,000
This Rs. 5,000 is over and above the tax amount that you will be paying in any case.
If you do not file your return at all, you will have to pay 1% interest till the end of the assessment year i.e. 31st March. In the example above, your liability would be 8% of Rs. 1,00,000 which is Rs 8,000.
Advance Tax means paying your tax dues based on the dates (usually quarterly) provided by the income tax department. If you don’t pay advance tax, you may be liable to pay interest under section 234B.
Who needs to pay Advance Tax?
All assesses including salaried employees, self-employed professionals, businessmen etc. are required to pay Advance Tax where the tax payable is Rs 10,000 or more.
Late Payment Interest
Here are the two situations in which interest is applicable –
OR
In any one of the cases, interest under section 234B shall be applicable.
Interest is calculated @ 1% on Assessed Tax lessAdvance Tax.
Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.
Illustration 1
Radhika’s total tax liability is Rs 48,000. Radhika paid this amount on 12th June while filing her return.
Radhika’s total tax liability is more than Rs 10,000, she was liable to pay advance tax. Therefore, Radhika will be liable to pay interest under section 234B.
Interest calculation
Rs 48,000 x 1% x 3 (April, May, June)
= Rs 1,440
Radhika is liable to pay Rs 1,440 interest as per section 234B.
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 |
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.
Illustration
Consider that your total tax liability for this financial year is Rs. 100,000 it needs to be paid in installments as explained above
If however, 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.
Follow link for Income Tax Calculator
https://www.incometaxindia.gov.in/Pages/tools/income-tax-calculator-234ABC.aspx
| Originally posted by : Rohit | ||
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