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Delay in Advance Tax Payment | Company Vakil

Introduction to delay in advance tax payment

A chance missed has no repercussions, as it was missed and you remain ignorant of it. But delay in advance tax payment has serious consequences resulting in less money at your perusal. Due to delay in advance tax payment heavy penalties will be levied. Advance tax payment must be paid by everyone having an estimated tax liability of over Rs.10, 000. Section 234 B and Section 234 C of the Income Tax Act provides penalty for delay in advance tax payment.

Interest under section 234 B – Penalty for Delay in Advance Tax Payment

Under section 234 B, interest for delay in advance tax payment is imposed at 1% simple interest per month. The penalty interest is imposed on the amount of unpaid advance tax. If there is a delay in advance tax payment, then interest is imposed on the amount by which advance tax is falling short.

The penal interest for default in advance tax payment will be levied from 1st April of the relevant financial year till the date of determination of income under section 143(1) or when a regular assessment is made, wherein, till the date of such a regular assessment is made.

In case the taxpayer has paid any tax prior the completion of the assessment, then interest will be imposed in the following manner:

  • Up to the date of payment of self assessment tax, interest will be computed on the amount of outstanding advance tax.
  • From the date of payment of self assessment tax, interest will be imposed on the unpaid amount of advance tax after subtracting the self assessment tax paid.
  • In case income is increased due to re computation, interest will be levied on the differential amount from the first day of the assessment year till the date of assessment/re-calculation.

Interest under section 234 B of Income Tax Act is imposed upon those taxpayers who delayed in the advance tax payment.

234 B: interest in Income Tax Payment

Section 234 B provides for imposition of interest on those taxpayers, who have made a delay in advance tax payment. There are similar interest penalties stated under section 234 A and section 234 C.

Most noteworthy, advance Tax is the income tax payable if your tax liability is more than Rs. 10,000 in a Financial Year. Advance Tax ought to be paid in the year in which the income is accepted. Therefore, it is also known as the ‘pay-as-you-earn’ tax.

Applicability of section 234 B:

There are two situations in which interest under section 234 B is imposed:

  • Firstly, when a taxpayer is subject to payment of Advance Tax but he omits to do so, or
  • Secondly, when he has paid, but the amount paid is below 90% of the Assessed Tax.

List of taxpayers who do not need to pay Advance Tax

  • A taxpayer who chooses for the presumptive scheme of calculating business income under section 44 AD @ 8% of turnover.
  • Resident senior citizen, who does not have any income from his profession, need not pay Advance Tax.

Computation of interest u/s 234B

  1. Interest is imposed @ 1%
  2. It is the simple interest that is charged.
  3. Interest is computed @ 1% on Assessed Tax.
  4. Any fraction of month shall be recognized as a full month for the purpose of computation of interest.
  5. Above all, the amount of taxes pending shall be rounded off to the multiple of 100.

SECTION 234 C: Interest levied for delay in advance tax payment

Income Tax Department aspires to make it as easy as possible for the citizens to comply with Income tax payment .Therefore; one has the choice of paying it in 4 segments over the year. However, if you still delay, there are some repercussions in the form of penalty. Section 234C is applicable if a taxpayer has paid advance tax which is below the necessitated amount. Since, advance tax is on the basis of an estimated tax liability, only tax payment that falls below the limit will be liable for penalty under Section 234 C.

Basically, Section 234 C provides for the interest to be imposed on defaulters of Advance Tax Installment Payments. This is the last section in a 3-part series about Interest levied by the IT. Furthermore, interest under Section 234 C will not be imposed for delay in advance tax payment due to increase in tax liability in respect of capital gains or income from lotteries, crossword puzzle, etc. or income from a new profession. In such situations, the taxpayer would be entailed to pay the advance tax as a part of the next installment or up to 31st March, if no installment is left outstanding.

1. Due dates for payment of Advance Tax

The Income Tax department presumes you to pay your taxes on a scheduled time; or else you will be charged interest for delay in advance tax payment. Furthermore, at the time of filing returns, advance tax is paid on the following stipulated dates of a financial year.

On/Before In case of all taxpayers other than taxpayer opting for presumptive income u/s 44 AD Taxpayers going for presumptive income u/s 44 AD
15th June Up to 15% of advance tax payable
15th September Up to 45% of advance tax payable
15th December Up to 75% of advance tax payable
15th March Up to 100% of advance tax payable Up to 100% of advance tax payable

2. Interest

The interest for late payment is at 1%. It is computed from the individual cut off dates shown in the above table, till the date of actual payment.

Computation of Interest under section 234 C – In case of a Taxpayer other than the payer choosing for presumptive income u/s 44 AD

Rate of Interest charged duration of Interest Amount on which Interest is computed
If Advance Tax paid on or before June 15 is less than 15% of the Amount* Simple interest @1% per month 3 months 15% of Amount* (-)tax already deposited before June 15
If Advance Tax paid on or before September 15 is less than 45% of the Amount* Simple interest @1% per month 3 months 45% of Amount* (-) tax already deposited before September 15
If Advance Tax paid on or before December 15 is less than 75% of the Amount* Simple interest @1% per month 3 months 75% of Amount* (-) tax already deposited before December 15
If Advance Tax paid on or before March 15 is less than 100% of the Amount* Simple interest @1% per month 100% of Amount* (-) tax already deposited before March 15

Summary

Advance tax payment must be paid by everyone having an estimated tax liability of over Rs.10, 000. Section 234 B and Section 234 C of the Income Tax Act provides penalty for delay in advance tax payment.

 

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