Penalty under 234b and 234c

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 13 September 2020

Yes, required to pay advance tax as per your estimated tax liability, if it's exceed 10,000/-

annu Goyal (1102 Points)
Replied 13 September 2020

As your tax amount is exceeding Rs. 10000 , your advance tax liability arised and Yes, you should pay for FY 2020-21also

CA Raj Doshi (Practising CA) (8924 Points)
Replied 14 September 2020

Agree with replies of other members

sanvar (NA) (54 Points)
Replied 14 September 2020

Dear all, thank you very much for your kind replies. I have below doubts
1)For FY2020-21, by which month I should have paid advance tax to avoid penalty for AY2021-22 as it is already september and I was shocked to see the penalty as this something new for me
2)Should I pay some random amount as advance tax?
3)If by any chance I withdraw some amount due to emergency and if the actual income tax is less than 10,000, can I claim refund of the advance tax or will it get carried over for next financial year?
4)Is there any way I can avoid paying advance tax (due to bank interest)?

I humbly request your valuable advice on above 4 queries . Thank you again for your valuable time.

CA Raj Doshi (Practising CA) (8924 Points)
Replied 14 September 2020

1. The due date for advance tax are 15th June, 15th Sept, 15th Dec and 15th March. You have to pay 15%, 45%,75% and 90% of your estimated final.tax liability

2. No, you should make a rough computation and estimate advance tax liability.

3. The excess amount paid will be refunded back to you once your ITR was that year is filed and processed.

4. No, there is no escape to paying advance tax due to bank Interest unless you keep NIL balance in all your bank accounts.

Once there is a taxable income, the consequential tax cannot be escaped. Ofcourse, there are deductions and exemptions allowed but the maximum deduction of saving bank interest is lower of actual saving bank interest OR Rs.10000 for individuals upto 60 years / Rs. 50000 for individuals above 60 years under sec 80TTA and sec 80TTB.

Regards
CA. Raj Doshi
R C D & Co.
Chartered Accountants
E : raj @ rcdco.in

1 Like

sanvar (NA) (54 Points)
Replied 14 September 2020

Thank you very much for your replies.

If I understand , I have time till 15 March to pay advance tax. If on 14th March 2021, I calculate my bank interest tax payable and pay tax on 14 March 2021,
1)will I still be fined for not depositing tax for each quarter (15% before 15th Jun,45% before 15 Sept,75% before 15 Dec)?

2)Will I be fined for each quarter only if again balance tax payable exceeds 10,000 inspite of paying advance tax?

3)Instead of paying advance tax 4 times a year, if I pay between 70 to 90% tax before 15th June 2020 (which is not possible now) itself would there be an issue or is it mandatory to pay 4 times a year at 15%,45%,etc

Requesting your valuable advice

CA Raj Doshi (Practising CA) (8924 Points)
Replied 14 September 2020

1. Yes Interest will become payable for
not depositing on earlier due dates.

2. Once your overall tax liability exceeds 10000, so interest will begin for all quarters. It's not 10000 balance tax for every quarter.

3. You can pay lumpsum 90% now itself before 15th Sept to avoid any recurring payments

Interest is an inherent component. Alternatively, if you dont want to worry about advance tax at all, then best suggestion is to ask your employer to deduct TDS on higher side.

e.g If your income other than salary is 1 lakh and your average tax rate including cess is say 25% which comes to 25000

then ask your employer to deduct 2083 tds extra per month.

In that case, all your taxes would get paid on advance basis, and you need not pay any further advance tax.

Interest will also not get payable, if your employer deducts TDS on higher side.

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sanvar (NA) (54 Points)
Replied 14 September 2020

Thank you very much Raj for your kind replies. One last question, if I pay 90% tax after 15 September and before 15 March, would that also be ok to avoid the fine? Thanks in advance.

CA Raj Doshi (Practising CA) (8924 Points)
Replied 14 September 2020

The interest for the period April to Sept is already levied and cannot be undone. However for the period Oct to March,you will be able to avoid if paid earlier.

sanvar (NA) (54 Points)
Replied 14 September 2020

I am not able to understand that part.

Let's say that my total tax outstanding at the end of current financial year is Rs.11,000. Now if I had not paid advance tax, then the penalty would have been calculated for all the quarters for Rs.11,000 under 234b and 234c.

But if I pay even 60% of the amount, i.e. Rs.6,600 before 15 March, then the total tax yet to be payable at the end of the financial year is Rs4.400 i.e.11,000-6,600.

As the outstanding tax is Rs.4,400 which is well below the Rs.10,000 limit why would I still be fined?

CA Raj Doshi (Practising CA) (8924 Points)
Replied 14 September 2020

Because that's the law. The talk of Gross Advance Tax Liability and Not Balance Advance Tax liability( after reducing payments done) as you are suggesting.

sanvar (NA) (54 Points)
Replied 15 September 2020

Thank you very much Raj for your kind replies. Now I have understood it. Although yesterday I paid advance tax as per your advice, I don't think in future I will include bank interest in income tax. Besides banks themselves deduct TDS. I don't think any other economies taxation is as complex as India's. Even my friends are not declaring bank interest in income tax. The worst thing that would happen to me probably might be that income tax might send notice to redeclare the income tax and pay upto 200 percent tax. But if there are big fishes out there, they might not come after small time tax payers.

CA Raj Doshi (Practising CA) (8924 Points)
Replied 15 September 2020

Banks deduct TDS on FD interest only. Honesty has nothing to do whether it is big fishes or small time tax payers. Besides the economy wouldn't flourish with your individual tax contribution on saving bank interest. Yes it will prosper with many of us voluntary declaring true and fair particulars of income which would eventually pave a way for a growing economy. Coming to your mindset about complex taxation, definitely that's not the case at all. Generally, matters which I would not be familiar with are complex for me and that seems the case for you too.

Lastly, your friends are not the right advisors and will not sit beside you when you might face any income tax notices. Any calculated risk based on interpretation of law and reference to earlier cases , tax planning avenues is always advisable.

Real Life Example : A client faced income tax notice for Missing to disclose a Bank account in his ITR even though he had considered the same in his income particulars. But then other queries developed as he had to furnish FULL and proper books of accounts and finally ended up pay Penalty of 1.5 lakhs for Not Getting Tax Audit done.