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.
