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The Income Tax Act 1961 says that if a taxpayer defaults to abide by the rules and regulations stated in the act then he or she will be charged with certain penalties as punishments. This will be in the form of penal interest levied on taxable amount. The act slabbed these penalties under Section 234. The interest imposed for incomplete tax payments comes under the section 234B.
If the taxpayer delays the payment of advance tax charged to him or her, he or she will have to pay interest under section 234B. This interest can also be levied on you if you have paid the advance tax and the amount is less than 90% of the assessed tax.
That means there are two conditions under which the interest is charged to the taxpayer under Section 234B. These are
The interest that has to be levied on the defaulter taxpayer who has not paid the advance tax or paid a part of it less than 90% of the assessed amount is 1% per month or part of the month till the time he or she has delayed the payment.
To better understand this Section 234B, you should know the following terms and concepts:
This advance tax applies to taxpayers who are liable to pay Rs.10,000 or more as taxes in the financial year. Those with tax liability pay this tax from various income sources, including salary. As the name suggests, this amount is paid in advance and not as a lump-sum amount at the year-end. The defaulters of this advance tax on time or defaulter completely will be liable to pay interest under Section 234B.
If the taxpayer defaults to pay advance tax completely or in part, he or she will be charged an amount as a penalty in the form of interest. The interest to be paid is 1% on the assessed tax ( the tax to be paid after the advance tax deduction). If there is a part of a month, it is rounded off to a full month. The amount on which interest is calculated is also rounded off so that any fraction of a hundred is ignored.
The applicable interest is divided into three cases:
1. When no tax deduction at source is made during the calculation of the tax and the amount is more than Rs. 10,000, and the individual defaults to pay the advance tax.
2. When the total tax to be paid after Tax Deduction at Source is more than Rs. 10,000, the individual defaults to pay the advance tax.
3. If the advance tax is paid by the taxpayer but not complete. If the taxpayer pays less than 90% of the assessed tax, he or she is liable to pay interest for the months delayed.
If you default to pay taxes on time or do not comply with the rules and regulations of income tax you will be charged with a penalty in the form of interest.
Yes, if you delay the payment of advance tax, you will be charged a penalty in the form of interest on the taxable amount for the months of delay.
The interest that is charged for delay in paying advance tax under Section 234B is computed from the due date until the date the payment of advance tax is done in the financial year The interest is charged @1% per month for the months you have delayed your payment of advance tax.
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