Section 234C of the Income Tax Act, 1961 offers tax provisions that are applicable in case the taxpayer fails to make advance tax payment. The Income Tax Department offers convenient time frame to taxpayers to make payment of advance tax as per scheduled four instalments i.e. once every quarter of a financial year. However, in case the taxpayer fails to do so, an interest will be charged as a penalty under section 234C of the Income Tax Act.
Interest Payable Under Section 234C
The Income Tax Department charges interest as penalty at 1% of the total outstanding due on advance tax payable. Interest is calculated from the individual’s cut-off dates, till the date of actual payment of the outstanding taxes.
Advance Tax Payment Schedule
|Tax payable by those who did not opt for presumptive income u/s 44AD
|Tax payable by those opting for presumptive income u/s 44AD
|15% of Assessed Tax
|45% of Assessed Tax
|75% of Assessed Tax
|100% of Assessed Tax
|Up to 100% of Advance Tax Payable
Calculation of Interest Under Section 234C
Below given are some of the important conditions under which interest is calculated under section 234C of the Income Tax Act-
- Interest will be charged at 1% per month on the net outstanding tax
- Interest on the net outstanding tax is calculated as per simple interest
- Any part of the month will be calculated as a full month for interest calculation purposes
Section 234C- FAQs
Interest under section 234C is levied for a period of 3 months, in case of short fall in payment of 1st, 2nd and 3rd instalment and for 1 month, in case of short fall in payment of last instalment.
The rate of interest under section 234C is 1% per month.
Recently, the Supreme Court of India in the case of Ian Peters Morris1 held that the employee would not be liable to pay interest under Sections 234B and 234C of the Income-tax Act, 1961, in relation to any income chargeable to tax as salary.