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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
Last updated on April 2nd, 2021

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 @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?

  2. 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

  3. Hi
    When I pay the advance tax through the ZERODHA-QUICKO platform, does it get saved/stored? For example I have paid for Q1. so when I have to pay for Q2, will this be automatically calculated?
    Thanks

  4. I have paid the Advance tax of Q1, but didn’t received any email from income tax portal! So, Is that normal? I received the Challan No. receipt, but no email from IT portal!

  5. Hey @Gaurav,

    Once you pay the Advance Tax, you have an option to download the challan. In case you missed downloading it, the tax credit for the same will be reflected in your Form 26AS.

  6. Hey Girimon_Vasudevan,

    When you pay advance tax through our tax planner app, you should download the challan and then you
    need to add the it the advance tax toggle under the tax credits in the tax planner tab to see your tax credits reflected in the appropriate quarter.

  7. @Nireka
    Thanks. I have done it for the current year.
    I did not do it for the last year. How can I add it now?

  8. Hi @Girimon_Vasudevan,

    If you missed paying advance tax last year, then the interest penalty may be applicable u/s 234B & 234C.
    You can pay that as along with your self-assessment tax the filing your Income Tax Return

  9. Sorry, I didn’t miss the payment. I missed to add it in the tax credit on your portal. I am unable to add it now.

  10. @Girimon_Vasudevan, once you login to the Tax Planner navigate to Tax Planner > Income Situation > Tax Credits to add the tax credits.

    If you face any issue can write to us at help@quicko.com and our team will be happy to assist you.

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