Interest Imposed by the IT Department – Section 234C

The income tax department seeks to make it as easy and convenient for citizens to pay for prepayments. Thus, you have the option to pay it in 4 instalments during the fiscal year. However, if you still default, there are some consequences in the form of interest payments. Basically, section 234C deals with interest that should be paid on Defaulters Advance Tax Payment. This is the final part of a 3-part series of risks put by the IT department.

Part III: Section 234 C (Interest for Deferred Payment of Advance Tax)

IT Department – Section 234C

1. Due dates for paying advance tax

The income tax department assumes that you pay your taxes on time, otherwise, there will be a fee for late payment at the time your application is submitted. The tax is paid in the following 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

2. Interest

Interest due to delay is set at 1% of the tax amount. It is calculated from the individual cut dates shown above, until the date of actual payment of outstanding taxes. Calculation of interest according to section 234C – If a taxpayer other than the person who chooses predictable income u/s 44 AD

Rate of Interest Period of Interest Amount on which Interest is calculated
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

3. Example

Consider that your total tax liability for this financial year is Rs. 100,000 and has to be paid in instalments as described above. Let’s assume that no TDS is here. If you have made payments instead, you are responsible for paying interest according to 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. Remember that automatically calculates interest according to Article 234 for you based on the amount you enter and dates.

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Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.

Certicom Consulting

Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.