Interest payable for deferment of Advance tax (Section 234C)

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

 

Example-

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?

Solution-

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

 

Summary
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Interest payable for deferment of Advance tax (Section 234C)
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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.
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myITreturn
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4 thoughts on “Interest payable for deferment of Advance tax (Section 234C)

  1. bakul saha

    whether total interest on all banking savings interest exceeeding rs.10,000/- is to be calculated for the ayear and tax to be paid as advance tax before july? Please confirm

    Reply
    1. myITreturn Team - DP

      Dear Sir/Madam,
      If your estimated tax liability is more than Rs.10,000 (after deducting TDS amount) , you will be required to pay advance tax.
      If your savings bank interest is more than Rs.10,000 then, you will get a deduction upto Rs.10,000 under section 80TTA and balance interest income will be taxable and is to be included in your estimated total income for computing advance tax.

      Reply
  2. H R KRISHNA

    Sir I am ex..Serviceman . Getting monthly pension rs 7 k . Bank interest for a fixed deposit is rs 12 k per month . Own house given for rent for rs 5 k per month . Presently serving in a pvt. Ltd. And getting salary 19 k per month . FINALLY I AM STAYING IN A RENTED HOUEE IE. PAYING.. 15 k PER MONTH . THIS IS MY STATUS . Kindly I may informed I should file IT RETURNS OR OTHERWISE ….Tks and Regards ..
    H R KRISHNA ….19..3..16..Saturday. .

    Reply
    1. myITreturn Team - DP

      Dear Sir,
      Yes, you are required to file income tax returns. Please visit myitreturn.com to file your returns. In case you want to get your returns filed by our tax experts, opt for our assisted filing service and get a complete assistance in getting your returns filed.

      Reply

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