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Advance Tax and How to Avoid Interest on Advance Tax (Part-2)

Advance Tax and How to Avoid Interest on Advance Tax


-Dr. Lalit Kumar Setia*

(iv) 15th March: 

Upto 15th March, 100% of estimated tax liability should be paid in order to avoid the payment of interest @1% per month for the period of one month.
Let’s understand with the help of an example:
Suppose Mr. A computed in the June and found that it will be required to pay Rs. 1,00,000 as tax liability for the financial year. Then he has to pay 15%, 45%, 75%, and 100% of estimated tax liability i.e. 15000, 45000, 75000, and 100000 respectively upto 15th June, 15th September, 15th December, and 15th March of the financial year. 
In case, amount is not paid or less amount is paid by these due dates; simple interest @1% is charged u/s 234C as interest on deferred payment of advance tax. For example, if Mr. A has not paid advance tax during the financial year; then he has to pay interest: 
(15000x3x0.01) + (45000x3x0.01) + (75000x3x0.01) + (100000x1x0.01) = 450 + 1350 + 2250 + 1000 = 5050. 
If Mr. A pays partial amount of advance taxes, then the interest will be reduced to that extent.
In case of employees, usually TDS is deducted every month and deposited by the employer. If the TDS is not deducted accurately i.e. 15%, 45%, 75%, and 100% upto 15th June, 15th September, 15th December, and 15th March respectively; then the employee will also be charged with interest on deferred payment of advance tax u/s 234C.
*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 

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