As discussed the income tax department expects that the taxpayer should pay all the advance tax according to the schedule of the installments. The scheduled four installments are once in every quarter of the financial year. If in any case the taxpayer delays the payment of advance tax, the income tax department impose penal interest in the form of penalty under Section 234C.
Advance tax is the amount of tax that is paid in advance and not at the end of the financial year. This tax is calculated on the expected income in the financial year. The advance tax is only applicable in case if income tax liability exceeds Rs. 10,000 after the deduction of tax deduction at source (TDS) for the financial year.
When the taxpayer delays the payment of an installment fixed by the income tax department, he or she is imposed an interest under section 234C. The interest under this section is charged according to the scheduled installments.
If in case the total tax to be paid by Mr. X is Rs. 10,00,000. This tax is to be paid in four installments. The calculation of interest to be charged for delay will be calculated as follows: Note: Assumption is there is no tax deduction at source (TDS)
|Due dates||Advance tax to be payable||Advance tax paid||Shortfall calculated from the scheduled installment||Months for which interest is to be calculated||Penal interest|
|15th June||1.50,000 (15%)||50,000||150000-50000= 100000||3||100000*1%*3=3000|
|15th September||4.50,000 (45%)||2,50,000||450000-250000= 200000||3||200000*1%*3=6000|
|5th december||7.50,000 (75%)||3,50,000||750000-350000= 400000||3||400000*1%*3=12000|
|15th March||10.00,000 (100%)||5,00,000||1000000-500000= 500000||1||500000*1%*1=5000|
|Due date||Taxpayers opting for presumptive income under section 44AD|
|On or before 15th June||Nil|
|On or before 15th September||Nil|
|On or before 15th December||Nil|
|On or before 15th March||Upto 100% advance tax payable|
* The amount on which tax is calculated is tax on total income less tax deduction at source(TDS) less relief under section 90 or 91 less tax credit under section 115JD.
* If there is a shortfall of payment of advance tax due to wrong calculation or failure to estimate the amount of capital gains or speculative income such as gambling or lottery or so on, no interest is payable.
For default in deferred payment of advance tax in installments fixed by the income tax department the taxpayer is charged a penalty in the form of interest under Section 234C. The department scheduled a proper time duration and the percentage of amount to be paid till that date. If you fail to pay that amount of advance tax on the due dates you will be charged interest @1% per month on the amount that is left to be paid.
The department has fixed four installments for advance tax to be paid in each quarter of the financial year. Default in making these advance payments in each quarter will make you pay interest on the amount at the rate of 1% per month.
You will be charged interest @ 1% per month for the number of months you fail to pay the instalments that are fixed in the income tax act 1961. If you pay the part payment of the installment fixed, the interest is to be calculated on the leftover amount you have to pay.
The income tax department fixed four installments for each quarter of the financial year for making payment of advance tax of that financial year.
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