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Section 234B of Income Tax Act : Interest for Non-Payment of Advance Tax

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Hiral Vakil

Advance Tax
Income Tax Filing
ITR Penalty
Section 234B

The government always declares the due date for filing the ITR and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234. Hence, it is also important to know the advance tax due dates in order to avoid penalties for late payment. The interest penalty for non-payment of Advance Tax is levied under section 234B. Other than that, there are two types of interests under section 234:

So, let’s discussing Section 234B in this article. Section 234B is the penalty interest imposes on the taxpayers in case there is no advance tax payment during the year. Hence, the liability of payment of penalty u/s 234B arises after the end of the Financial Year till the date of filing of ITR. Calculation of the interest under section 234B takes place in the following cases:

  1. When no payment of advance tax takes place even though the taxpayer is liable to pay the same
  2. When the advance tax paid is less than 90% of the Assessed Tax.
    Assessed tax = (Total tax liability – TDS/TCS)
Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Quarterly)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

According to Section 208 of the Income-tax Act, the assessee has to calculate advance tax and pay if his Tax Liability of a particular Financial Year is INR 10,000 or more.

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Example of Penalty u/s 234B

Vijay is running a small business. His tax liability for the year is INR 32,500. He has not paid any advance tax till 31st March but he has a TDS credit of INR 5000. The entire tax was paid by him at the time of filing the return of income on 31st July.

In this case, since he has not paid any advance tax, interest will be calculated from the 1st day of the assessment year till the day of paying tax and filing his return.

So interest under section 234B = INR 27,500 i.e (INR 32,500 – INR 5000) x 4 months x 1% = Rs 1100

Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]
Advance Tax Filing (Annual)
CA Assisted Advance Tax calculation and payment for Individuals and businesses with tax payable more than INR 10,000 after TDS deducted
[Rated 4.8 stars by customers like you]

FAQs

What is the difference between 234A and 234B?

The Interest u/s 234Ais levied on taxpayers if they delay in filing their Income Tax Return (ITR). While Interest u/s 234B of Income Tax Act is levied upon those taxpayers who default in payment of Advance Tax.

Do salaried people have to pay advance tax?

​In the case of salaried individuals, TDS is deducted from their salary and deposited to the government by their employer. So as far as salary income is concerned, they are not required to pay advance tax. However, for all the incomes other than salary, if the total of such incomes exceeds INR 50,000 then they will have to assess the tax liability on the same and pay Advance Tax.

How do I determine whether I am liable to pay advance tax or not?

​No. Since TDS is deducted from salary income by the employer no need to pay advance tax. However, for all the incomes other than salary, if the total of such incomes exceed INR 2,50,000 then they will have to assess the tax liability on the same and pay Advance Tax.

How to pay advance tax?

Deposit in the bank with Advance Tax challan or
Online payment using Net banking facility

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in four different instalments in case your Taxable Liability is more than INR 10,000 for the financial year which stands true for you.

    The due dates for advance tax installments are:

    • 15th June - 15% of the tax liability
    • 15th Sept - 45% of the tax liability
    • 15th Dec - 75% of the tax liability
    • 15th March - 100% of the tax liability

    If you are eligible to pay advanced tax but have not paid advance tax, the penalty will be applicable u/s 234B and 234C.

    Let us know if you have any further questions!

  2. Hi Team, I had assumed that I will be able to pay advanced tax before March because I thought I could go for presumptive tax filing. But now it looks like I cannot opt for a presumptive taxation scheme. So does it mean that I did not pay the advanced quarterly tax that I was supposed to pay?

    If yes, what is the penalty in every case or are there some exceptions to avoid this interest penalty?

    Thanks in advance!

  3. Hey @TeamQuicko

    I have LTCG of more than 7 lakhs from the equity for this year. Is there a way to reduce my tax liability? Also, do I have to pay the tax in advance? If I fail to do so, what will be the penalty/interest percentage I have to pay during my tax filing in 2020?

  4. Do I have to pay Advance Tax if the TDS for the year is sufficient to cover tax liabliltiy?

    Does Dividend on equity shares attract separate Advance Tax or is it just another source of income?

  5. Hi @vivek25,

    You are liable to pay advance tax if your total outstanding tax liability for the financial year after TDS is above INR 10,000.

    To calculate your advance tax liability you need to add your estimated income for the financial year from all sources including - Salary, House Property, Capital Gains, Business & Profession and other sources.
    Next, subtract all eligible deductions, expenses, and Tax Credit available to you.
    Now, if your outstanding tax liability is above INR 10,000, you need to pay advance tax to avoid penalty u/s 234B and 234C.

    Hope this answers your query :slight_smile:

    You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime

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