Hello my dear friends! Your friend Tax Toto is back as promised to tell you more interesting things about taxes. What shall we talk about today? I think the time is right to talk about Advance Tax. Did you know that if you have taxable income other than salary, then it’s mandatory for you to pay Advance Tax? The due date to pay the second instalment of Advance Tax is upon your head. 15th of September is the due date to pay the taxes mentioned earlier. In case you could not pay first instalment, you could pay it along with second one including interest penalty u/s 234C.
Do you remember, earlier I had shared a calendar marking important tax related dates of September with you. In the calendar, I had informed you about the significance of 15th September also. However, a thought crossed my mind that you may forget to check it by chance. So I made sure that I meet you once more to remind you in the nick of time.
Advance Tax is to be paid in 4 quarterly instalments. Government gives you this opportunity to make it easy for you to pay your taxes. If you wait for the last opportunity to clear your dues, you put unnecessary burden on yourself. There is penalty for missing the due date of individual instalments (u/s 234C) as well as for failing to pay at least 90% of the taxes by the end of Financial Year (u/s 234B), i.e., on or before 31st of March. If you fail to do so, you can be penalized.
If your tax liability for the Financial Year is greater than Rs. 10,000 and you failed to pay any tax or, you paid some tax but it was less than 90% of Assessed Tax (your final computed tax liability) then you invite interest penalty u/s 234B & 234C.
The look on your face says that you are confused. I guess I did not explain properly. Let me try once again with the help of a couple of examples.
Suppose our imaginary friend Jay has a total tax liability of Rs. 72,000. Let’s say that our unlucky friend failed to pay his Advance tax on time and paid it only at the time of filing his tax return which he did on 10th of July. Since his total tax liability was more than Rs. 10,000, he had to pay penalty interest u/s 234B & 234C along with the taxes due. So the total interest payable by Jay will be calculated as under:
So total interest payable by Jay u/s. 234 B&C will be Rs. 6,516/- (3636+2880)
Now let me help you with another example to understand how interest is levied upon you if you paid some of the advance tax but it is less than 90% of the Assessed Tax.
Jay’s friend Veeru was aware of Advance Tax provisions and paid some amount of Advance Tax on regular basis. He had a total tax payable of Rs. 72,000 as was the case with Jay and he paid Rs. 8000 before 15th June and Rs. 15000 each in next three quarters. Still, he had some shortfall in every instalment he paid. So by 31st of March he paid total Rs. 53,000. The remaining Rs.19,000 was paid on 10th of July next year while filing tax return.
So total interest payable by Veeru u/s. 234 B&C will be Rs. 1,796/- (1036+760)
So, my dear friends, I urge you to clear your dues on time and avoid unnecessary hassles. I hope this information was helpful. I will see you soon with some more interesting things to share.