Advance Tax and Interest u/s 234

19 Oct 2022

 Advance Tax and Interest u/s 234

 

Advance tax is the amount of income tax that is paid in advance. There are certain rules which are made by the income tax department with respect to advance tax liability. Generally Self assessment tax is paid in assessment year however advance tax is to be paid in previous year itself. Advance tax is to be paid in prescribed installments. If a person fails to pay advance tax then interest and penalty will be leviable as prescribed rate u/s 234 A,B,&C. 

Every taxpayer whose estimated tax liability is Rs 10,000 or more is required to pay advance tax. It has to be paid in 4 installments as follows:



In case if the taxpayer is opting for presumptive income u/s 44AD then entire advance tax needs to be paid in one installment i.e.  15th March.

 

Still finding the advance tax as Complexity????

 

Nothing to worry just watch the video for more detail:

https://youtu.be/rO0C1Ez0eLM


Interest for delay in filing the return of income [Section 234A]

 

Taxpayers are required to pay interest u/s 234A @ 1% per month or part of a month. Interest under section 234A is levied from the period commencing on the date immediately following the due date of filing the return of income and ending on the date of furnishing the return of income, or in case where no return has been furnished, on the date of completion of the assessment under section 144. It should be noted that while computing the period of levy of interest, part i.e. fraction of a month is considered as full month.


Interest for default in payment of advance tax [Section 234B]

 

Taxpayer is required to pay interest u/s 234B for default in payment of advance tax and is levied at 1% per month or part of a month, however interest u/s 234B is leviable if taxpayer has failed to pay advance tax though he is liable to pay advance tax or where the advance tax paid by the taxpayer is less than 90% of the assessed tax. Interest under section 234B is levied from the first day of the assessment year, i.e., from 1st April till the date of determination of income under section 143(1) or when a regular assessment is made, then till the date of such a regular assessment.

 

Illustration

 

Assessed tax: 2,00,000

Advance tax paid: 50,000

Date of Determination of Income: 31/08

Short advance tax payment: 1,50,000

Interest u/s 234C:

= 1,50,000*1%*5months

= Rs.7,500

 

 

 

 

Interest on delayed payment of Advance Tax u/s 234C

 

Every taxpayer who is making default in making advance tax is liable to pay interest @ 1% on the amount of tax due.

Calculation of interest on late payment of advance tax can be understand by following table:




No levy of interest if shortfall in payment of advance tax is due to capital gains or winning from lottery, etc. Interest under section 234C is not levied, if, the shortfall in payment of advance tax is due to failure to estimate the amount of capital gains or income referred to in section 2(24)(ix) (i.e. winning from lotteries, crossword puzzle, etc.) or income from a new business or income referred to in section 115BBDA (i.e., dividend received from a domestic company exceeds Rs. 10,00,000) and the taxpayer pays the required advance tax on such income as a part of immediate following installments or till 31st March, if no installment is pending.


Illustration


Suppose tax payable is Rs 2,00,000 advance tax paid is as follows:



Riteek Jain