Under Section 208 of the income tax law in India, every person whose estimated tax liability for the year is Rs 10,000 or more must pay advance tax. However, senior citizens are not liable to pay advance tax if they do not have an income from business or profession. NRIs, whose income in India exceeds Rs 1 lakh, are liable to pay advance tax.
Advance tax payment due dates
| 15% | Â Before June 15 of the FY |
| 45% | Â On or before September 15 |
| 75% | Â On or before December 15 |
| 100% | Â On or before March 15 |
Advance tax payment due dates for taxpayers opting for presumptive income u/s 44AD
| Nil | Â Before June 15 of the FY |
| Nil | Â On or before September 15 |
| Nil | Â On or before December 15 |
| 100% | Â On or before March 15 |
Any tax paid till March 31 will be treated as advance tax payment. Those missing these deadlines are liable to pay interest as a penalty under Sections 234B and 234C.
What is Section 234C?
Section 234C provides for interest for default in payment of instalments of advance tax. Interest under this section is levied if the advance tax paid in any instalment(s) is less than the required amount. This is levied in the following cases:
- In the case of taxpayers (other than those who opted for presumptive taxation scheme under Sections 44AD or 44ADA), interest will be levied if:
- Advance tax paid on or before 15 June is less than 12% of advance tax payable
- Advance tax paid on or before 15 September is less than 36% of advance tax payable
- Advance tax paid on or before 15 December is less than 75% of advance tax payable
- Advance tax paid on or before 15 March is less than 100% of advance tax payable
- In the case of taxpayers who opted for the presumptive taxation scheme of Sections 44AD or 44ADA, interest will be levied if the advance tax paid on or before 15 March is less than 100% of the advance tax payable.
No interest if the payment shortfall is due to capital gains or lottery winnings.
Interest under Section 234C is not levied, if the payment shortfall is due to failure to estimate the amount of capital gains or income referred to in Section 2(24)(ix) (i.e., winning from lotteries, crossword puzzle, etc.) or income from a new business or income referred to in section 115BBDA (i.e., dividend received from a domestic company exceeds Rs 10,00,000) and the taxpayer pays the required advance tax on such income as a part of immediate instalments or till March 31, if no instalment is pending.
Rate of interest
If you do owe interest, it is calculated at a rate of 1% per month or part of a month. This is simple interest, that is, it is based on the original amount you did not pay on time. The period for which interest is charged varies. If you did not pay enough in the first, second or third instalment, you will be charged interest for three months. If the last instalment is lacking, you will be charged interest for one month. The interest is calculated on the amount you did not pay on time.
FAQs
What is advance tax?
Income tax, which an individual or company pays to the government in advance is advance tax.
In how many instalments can advance tax be paid?
Advanced tax can be paid in four instalments over a financial year.
What is the interest charged on late payment of advance tax?
The interest is 1% on the amount due. It is calculated from the individual cut-off dates till the date of actual payment of outstanding taxes.
What is the difference between Sections 234B and 234C?
Section 234B applies interest to taxpayers who either do not pay advance tax or pay less than 90% of the net tax payable for the assessment year. Hence, interest under Section 234B becomes applicable after the fiscal year concludes and continues until the taxpayer settles the outstanding tax amount. Section 234C imposes interest when taxpayers fail to make timely tax payments within the fiscal year.
Who does not have to pay interest under Section 234C?
You are exempted from paying advance tax and interest under Section 234C if: You are a resident senior citizen with no income under the ‘PGBP’ If your net tax liability is less than Rs 10,000.
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