Section 234C: Penalty for Delay in Payment of Advance Tax

Author
By Hiral Vakil on March 7, 2019

As mentioned above, the assessee is supposed to pay Advance Tax if his Tax Liability of a particular Financial Year is estimated to be Rs. 10,000 or more.

As per the Income Tax Act, the assessee is required to pay advance tax in instalments as mentioned below:

Due date of instalmentAdvance Tax payable by Individual and Corporate Taxpayers
On or before 15th June15% of the advance tax liability
On or before 15th September45% of the advance tax liability
On or before 15th December75% of the advance tax liability
On or before 15th March100% of the advance tax liability

So in case of short payment of advance tax, interest will be calculated as follows:

ScenarioInterest
If paid Less than 45% of advance tax up to 15th September1% per month i.e. 3 months on the shortfall amount below 45%
Less than 75% up to 15th December1% per month i.e. 3 months on the shortfall amount below 75%
Not 100% Up to 15th March1% on the shortfall amount below 100% for 1 month

A scenario of interest calculation u/s 234C

Pratik is running a small shop. His tax liability is Rs. 45,000. He has paid advance tax as given below:

  • Rs. 21,000 on 15th September,
  • Rs. 5,000 on 15th December,
  • Rs. 15,000 on 15th March.

So the interest liability will be calculated as follows:

Installment Advance tax due
to be paid
Advance tax actually
paid till date
Shortfall Interest
15th September 20,250
(45% of 45,000)
21,000 0 0
15th December 33,750
(75% of 45,000)
26,000
(21,000 + 5000)
7750 233
(7750 x 3 months x 1%)
15th March 41,500
(100% of 45000)
41,000
(21,000 + 5,000 + 15,000)
4000 40
(4000 x 1 month x 1%)
Total Interest payable u/s 234C 273