If the taxpayer has not paid his/her advance tax in the particular financial year, then he/she will be levied to pay interest as a penalty under section 234B of the Income Tax Act. The section 234B is the second section of the three sections of interest levied by the Income Tax Department on the taxpayers.
There are two conditions under which interest is charged on the taxpayer under section 234B. They are-
- In case the assessee delayed the payment of advance tax
- In case the assessee paid the advance tax but not the complete amount i.e. the amount paid by the taxpayer is less than 90% of the assessed amount
Although, as per section 208 of the Income Tax Act, advance tax should be payable by the taxpayer in case the estimated tax liability is more than ₹10,000 or more in the particular financial year.
Interest Under Section 234B
The Income Tax Department charges interest as a penalty when-
- The assessee’s tax liability after deducting TDS/TCS is more than ₹10,000, and he/she has not paid the advance tax in a particular year
- The assessee paid the advance tax, but the advance tax paid is less than 90% of the assessed tax
Examples of Interest under Section 234B Calculator
Nimita’s total tax liability is Rs 48,000. She paid this amount on 12th June while filing her return. No tax was deducted at source in her case. Nimita’s total tax liability is more than Rs 10,000, and hence she was liable to pay advance tax. As a result, Nimita will be liable to pay interest under section 234B.
Interest under section 234B calculation-
Rs 48,000 x 1% x 3 (April, May, June) = Rs 1,440 Nimita is liable to pay Rs 1,440 interest as per section 234B.
Section 234B- FAQs
In case the taxpayers do not comply with the rules and regulations or fail to pay taxes on time, he/she will be liable to pay penalty in form of interest to ITD.
The rate of interest under section 234B is 1%.
Yes. Section 234B is applicable to all the assessees except senior citizens across the nation.