Advance Tax and How to Avoid Interest on Advance Tax
-Dr. Lalit Kumar Setia*
(ii) Section 234 (B):
If an individual doesn’t pay advance tax on due date, then interest is charged @1% on (assessed tax minus advance tax).
There may be two cases i.e. (i) tax liability becomes
more than Rs. 10000 and no advance tax is paid and (ii) advance tax is paid but
it is less than 90% of the assessed tax. While calculating the interest, part
of a month is rounded off to a full month and amount on which interest is being
calculated is rounded off in such manner that any fraction of a hundred is
ignored.
For example:
Mr. A is paying income tax of FY 2016-17 on 10th
July amounting Rs. 50000. Because his tax is more than Rs. 10000 and he has not
paid advance tax, he will be charged interest u/s 234 (B). The last date of
payment of Advance Tax was 15th March. He will be charged interest
for the months of April, May, June, and July i.e. Rs. 2000 (50000x1%x4).
Another example:
Suppose, in the above example, Mr. A had paid Rs. 40000
as Advance Tax on 29th March. Then:
It was required to pay at least 90% of assessed tax
as advance tax. Tax was Rs. 50000, then assessed tax becomes 90% of Rs. 50000,
i.e. Rs. 45000. Interest will be charged @1% on 45000 (assessed tax) – 40000
(advance tax paid) = 5000x1%x4 = Rs. 200.
*Copyright © 2018 Dr. Lalit Kumar. All rights
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