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Section 234C

Updated on February 21, 2024 , 7312 views

The income tax Department and the Government of India are always working towards making tax payments convenient and efficient for citizens. You have the option of paying Advance Tax in four instalments throughout the year. However, if you still Fail to keep up, you will attract a penalty in the form of interest.

Section 234C

This is mentioned in Section 234C in the Income Tax Act 1961. It elaborates on the interest to be levied upon those who Default in making advance tax payments. This is the third part of the three part series of Section 234 as Section 234A, Section 234B and Section 234C.

What is Section 234C?

Section 234C refers to the delay in payment of advance tax and the interest rate that will be imposed for the same. The IT department expects timely payments of advance tax in four instalments every financial year.

Advance tax refers to the applicable income tax to be calculated and paid during a financial year on the Basis of expected income rather than the end of the year. In the current scenario, taxpayers will need to pay tax when the income Tax Liability is based on the expected income for the year when it is more than Rs. 10,000. However, this amount should be above Rs. 10,000 after the Deduction of Tax Deducted at Source (TDS) for the financial year.

Advance Tax Payment Timetable

The advance tax can be paid in four instalments through the year.

The schedule for paying advance tax is mentioned below:

On or Before In case of all taxpayers other than taxpayer opting for presumptive income u/s 44AD Taxpayers opting for presumptive income u/s 44AD
15th June Up to 15% of advance tax payable NIL
15th September Up to 45% of advance tax payable NIL
15th December Up to 75% of advance tax payable NIL
15th March Up to 100% of advance tax payable Up to 100% of advance tax payable

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Interest Under Section 234C

Under Section 234C, 1% interest is charged on the total outstanding amount due on the advance tax payable. This is calculated from the individual’s payment dates till the date the tax is actually paid. This interest under section 234b and 234c is for senior citizens too.

Remember that the interest will be charged when the advance tax is paid on or before 15th June and 15th September is less than 12% and 36% of the net tax dues. There will be no further interest levied on taxpayers for the shortfall in payment of advance tax on account of unexpected Capital gains or Speculative Income.

The interest is also calculated as per simple interest calculation. Any part of a month can be considered as a full month for the purpose of interest calculation under Section 234C for AY 2020-21.

The difference between 234b and 234c is that the penalty under Section 234B is for the delay in payment of advance tax when advance tax is paid less than 90% of the assessed tax at the end of a financial year. The penal interest under Section 234B is calculated separately from the interest under Section 234C.

Example of Interest Payable Under Section 234C

Jaya works as a professor in a well-known college. She earns extremely well and falls in the bracket of paying Taxes. Jaya is always up-to-date when it comes to paying her taxes and she does not take it lightly. She has a schedule fixed on the to-do-list board that reminds her of her advance tax payment date. Her net advance tax was Rs. 1 lakh for 2019.

Here is what Jaya’s advance tax payment schedule looks like:

Payment Date Advance Tax to be Paid
On or Before 15th June Rs. 15,000
15th September Rs. 45,000
15th December Rs. 75,000
15th March Rs. 1 lakh

Conclusion

Paying taxes on time is the best thing to do if you wish to save on money as well as improve your standing with the Income Tax Department. If you forget often, go make a list of the dates and fix it on to a place where you go often at your workspace and home. This will serve as a reminder to pay your taxes on time so that you can escape from the penalty as imposed under Section 234C.

Disclaimer:
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