Section 234C of Income Tax Act
Section 234C of Income Tax
Advance tax is an income tax mechanism that facilitates the taxpayers to make their payments in multiple instalments instead of forcing them to spend on a single remittance at the end of the financial year. Like all tax payments, advance tax should be remitted within the due dates specified by the Income Tax Department. Section 234C of Income Tax Act deals with the penal provisions applicable for non-remittance of advance tax within the specified due date.
Highlights of the Section
The following are the salient features of this section:
- Interest under this section is charged if the taxpayer defaults in the payment of advance taxes within the dates specified by the Income Tax Department.
- The nature of interest imposed here is simple interest.
- Any fraction of a month will be deemed to be a full month for the calculation of interest.
- During the calculation of interest, the total income tax liability will be rounded off to the nearest multiple of 100. Any fraction of 100 is ignored.
Due Dates of Advance Tax Payment
The following due dates are applicable for the payment of advance tax:
| Quantum of Tax Payable | Due Date |
| 15% of the total liability | 15th June |
| 45% of the total liability | 15th September |
| 75% of the total liability | 15th December |
| 100% of the total liability | 15th March |
Calculation of Interest
Section 234C is imposed on taxpayers who fail to remit the liability of instalments within the due dates specified above. While the rate of interest is commonly fixed at the rate of 1% for all taxpayers, the source of calculation varies.
Presumptive Taxation Scheme/Section 44AD
Taxpayers under the umbrella of presumptive taxation scheme of Section 44AD are not required to make their payments in instalments but are necessitated to remit the entire amount of liability by the 15th of March every financial year. The simple interest would be calculated at the rate of 1% per month.
Other Taxpayers
The source of calculation of tax rates for other taxpayers are determined by the date of payment, which is as follows:
- If Advance Tax is remitted within the 15th of June – 12% of the total tax liability.
- If Advance Tax is remitted within the 15th of September – 36% of the total tax liability.
- If Advance Tax is remitted within the 15th of December – 75% of the total tax liability.
- If Advance Tax is remitted before the 15th of March – 100% of the total tax liability.
The formula given below is recommended for determining the amount on which the percentage of advance tax is calculated:
Tax on total income (-) TDS (-) relief u/s 90 or 91 (-) tax credit us/ 115JD.
Non-Applicability
Interest under Section 234C is not applicable in the event of underestimation or failure in valuing the amount of capital gains or speculative income such as lottery income, gambling income, and the likes of it.
Period of Levy
Interest under Section 234C is imposed for a period of three months for any shortfall in the payment of 1st, 2nd, and 3rd instalments. Any shortfall in the fourth instalment will lead to an interest levy that is valid for a period of one month.
