The due date for filing the ITR is always defined and if you miss the deadline to file your ITR, you might face the consequences like having to pay interest based on Section 234. The Penalty for Advance Tax delay in payment is levied under section 234C. Apart from that, there are two more types of interests under section 234
- Delay in filing of Tax Returns – Section 234A
- Delay of payment of Advance Tax – Section 234B
- Deferred payment of Advance Tax – Section 234C
So, let’s discuss Section 234C in this article. Taxpayers can pay the advance tax in 4 installments during the Financial Year. However, if you still default, there are consequences in the form of an interest penalty u/s 234C. This interest u/s 234C is calculated for the delay/non-payment of advance tax during the year.
As mentioned above, the assessee has to calculate advance tax and should pay his Tax Liability for a particular Financial Year if the amount calculated is estimated to be INR 10,000 or more. As per the Income Tax Act, the assessee is required to pay advance tax in installments as mentioned in the advance tax due dates table below:
| Due date of installment | Advance Tax payable by Individual and Corporate Taxpayers |
| On or before 15th June | 15% of the advance tax liability |
| On or before 15th September | 45% of the advance tax liability |
| On or before 15th December | 75% of the advance tax liability |
| On or before 15th March | 100% of the advance tax liability |
So in case of short/no payment of advance tax, interest/penalty will be levied u/s 234C and it is calculated as follows:
| Scenario | Interest |
|---|---|
| If paid Less than 45% of advance tax up to 15th September | 1% per month i.e. 3 months on the shortfall amount below 45% |
| Less than 75% up to 15th December | 1% per month i.e. 3 months on the shortfall amount below 75% |
| Not 100% Up to 15th March | 1% on the shortfall amount below 100% for 1 month |
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For Example
Pratik is running a small shop. His tax liability is INR 45,000. He has paid advance tax as given below:
- INR 21,000 on 15th September
- INR 5,000 on 15th December
- and, INR 15,000 on 15th March
Penalty for Delay in Advance Tax Under Section 234C of Income Tax Act
| 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 Int u/s 234c | 273 |
FAQs
– Interest u/s 234Aof Income Tax Act is levied on taxpayers if they delay in filing their Income Tax Return (ITR).
– The Interests u/s 234B of Income Tax Act is levied upon those taxpayers who default in payment of Advance Tax.
– Interest u/s 234C of Income Tax Act is levied upon those taxpayers who default in paying installments of advance tax.
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 Rs. 2,50,000 then they will have to assess the tax liability on the same and pay Advance Tax.
Before every due date for payment of Advance Tax, you will have to calculate your expected annual income and determine the tax liability on the same. If your total tax liability exceeds Rs. 10,000 then you are liable to pay advance tax as per the schedule has given above.
There are two ways of tax payment:
– Deposit in the bank with advance tax challan or
– Online payment using Net banking facility.
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:
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!
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!
Hey @riya_gupta
You will be charged an interest penalty under section 234C for the delay/non-payment of advance tax during the year @1% per month on the shortfall amount. Additionally, under Section 234B a penalty interest is imposed on the taxpayers in case the advance tax payment is less than 90% of assessed tax liability during the year.
You can avoid interest u/s 234B by paying at least 90% of your assessed tax liability by March 15, 2021.
Hope this helps!
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?
Hey @ViraajAhuja47, you can set off against non-speculative business loss like F&O for the current year. Long-term capital losses for the previous as well as the current year. Yes, you are required to pay advance tax in case your tax liability is more than INR 10,000 for the FY. The penalties for non-payment of advance tax are:
Non-payment of Advance Tax u/s 234B 3: Interest at 1% in case the taxpayer fails to pay 90% of the tax liability in the same FY
Delay in Payment of Advance Tax u/s 234C 1: if there is a delay in tax payment than interest @ 1% is applicable.
Hello @S_P
Tax paid on or before 31/03/2021 will be considered as advance tax for FY 2020-21. So a trader can determine the profits between 15th March to 31st March and pay the tax on 31st March, there will be no interest levied.
Hope this helps!
Hi @TEst_Netflix,
Tax audit is applicable when:
You can use this tool to determine if tax audit is applicable to you:
It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.
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?
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
You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime
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