What is Interest U/s. 234C?
If the Total tax liability of a taxpayer during a Financial Year is more than Rs. 10,000/-, then taxpayer is required to pay Advance tax. This Advance tax is required to be paid by taxpayer in 4 installments. If a taxpayer fails to pay such installments of Advance tax within due dates provided, he is required to pay Interest at 1% per month in addition to tax liability.
This interest is charged even if taxpayer has paid a small amount of Advance tax than the amount actually required to be paid.
How Interest U/s. 234C is calculated?
For F.Y. 2015-16, in case of Non-corporate taxpayers, Interest U/s. 234C is calculated as follows-
|Due date of installment||When Interest to be paid||Period for which interest is payable||Rate of interest|
|15th September||If Advance tax paid is less than 30% of total tax liability||3 months||1% per month|
|15th December||If Advance tax paid is less than 60% of total tax liability||3 months||1% per month|
|15th March||If Advance tax paid is less than 100% of total tax liability||1 month||1% per month|
Total income of Mr. Suraj (age 40 years) for F.Y. 2015-16 is Rs. 6,00,000/-. Tax payable on his income amounts to Rs. 46,350/-. His employer deducted TDS of Rs. 30,000/- from his salary. How much interest is payable U/s. 234C by Mr. Suraj at the time of filing of return, say, on 31st July, 2016?
Interest U/s. 234C is payable on tax liability after considering TDS deducted. In this case, tax liability is Rs. 46,350/- whereas TDS deducted amounts to Rs. 30,000/-. Hence, interest shall be payable on Rs. 16,350/- (Rs. 46,350 minus Rs. 30,000).
Calculation of Interest U/s. 234C is as follows-
|Percentage of advance tax to be paid||Amount of advance to be paid||Number of months||Amount of interest|
|30% of Rs. 16,350||Rs. 4,905||3 months||Rs. 147 (Rs. 4905*3%)|
|60% of Rs. 16,350||Rs. 9,810||3 months||Rs. 294 (Rs. 9810*3%)|
|100% of Rs. 16,350||Rs. 16,350||1 month||Rs. 164 (Rs. 16,350*1%)|
|Total interest payable U/s. 234C||Rs. 605|