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Section 234 C – Interest for deferment in installments of Advance Tax

Interest under Section 234C will be levied where you are liable to pay advance tax but has not paid advance tax as per installments, then you will be liable to pay a simple interest of 1% p.m. or part of the month for the period of delay.

Advance tax is paid on the following dates:

This is for both Individual and Companies

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax

For taxpayers who have opted for Presumptive Business Taxation Scheme

Due Date Advance Tax Payable
By 31st March 100% of advance tax

For taxpayers opting for presumptive taxation having business income from plying, hiring or leasing of goods – Section 44AE

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax
On or before 15th December 75% of advance tax
On or before 15th March 100% of advance tax
Calculation of Interest under section 234C
Particulars Rate of Interest Period of Interest Amount on which Interest is calculated
Where, if Advance Tax paid on or before June 15 is less than 15% of the Amount Simple interest @1% per month or part of the month 3 months 15% of Amount less advance tax paid on or before June 15
Where, if Advance Tax paid on or before September 15 is less than 45% of the Amount Simple interest @1% per month or part of the month 3 months 45% of Amount less advance tax paid on or before September 15
Where, if Advance Tax paid on or before December 15 is less than 75% of the Amount Simple interest @1% per month or part of the month 3 months 75% of Amount less advance tax paid on or before December’ 15
Where, if Advance Tax paid on or before March 15 is less than 100% of the Amount Simple interest @1% per month or part of the month 1 months 100% of Amount less advance tax paid on or before March 15

* Amount on which interest is computed shall be = Tax on Total Income for the year less TDS less relief u/s 90 or 91 less tax credit u/s 115JD(if any).
* Such Interest will be calculated up to 31st March of the financial year (after 31st March of financial year the interest will be calculated under section 234B.

How is interest u/s 234C calculated?

Let’s understand with an Illustration:

Suppose Mr. Gagandeep has a total tax liability for this financial year is Rs. 100,000 and he paid Rs. 5,000 before 15th June, Rs. 25000 before 15th Sep, 35,000 before 15th December. He had some shortfall in every installment he paid. So by 31st of March, he paid total Rs. 53,000. However Rs.50,000 was paid on 10th of July next year while filing the tax return.

If however, you made partial payments instead, you will be liable to pay interest as per the last column in the table below:

Payment Due Dates Advance Tax payable Total Advance Tax paid Shortfall (Cumulative) Penalties (Cumulative)
15th June 15,000 5,000 10,000 @1% x 3 x10,000 = 300
15th September 45,000 25,000 20,000 @1% x 3 x20,000=600
15th December 75,000 35,000 40,000 @1% x 3 x40,000=1200
15th March 1,00,000 50,000 50,000 @1% x 1 x 50,000=500

Therefore, Total Interest Payable is Rs 2600.

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