Advance tax means income tax should be paid in advance instead of lump sum payment at year end. Taxpayer need to pay Advance Tax in 4 installments in which he has to pay 15% of advance tax by 15th June, 45% of advance tax by 15th September, 75% of advance tax by 15th December and 100% of advance tax  by 15th March during the relevant Finance Year.

Advance Tax and Interest

Advance Tax Due date chart

Due Date Advance Tax Payable
On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax less advance tax already paid
On or before 15th December 75% of advance tax less advance tax already paid
On or before 15th March 100% of advance tax less advance tax already paid

Section 234 A – Interest for defaults in furnishing return of income

Interest under section 234A is levied for delay in filing the return of income. Interest is levied at 1% per month or part of a month.

Example-The due date of filing the return of income is 31st July, 2021, and return of income is filed on 9th January, 2022 i.e. after the due and hence, will be liable to pay interest under section 234A.

While computing interest, part of the month will be taken as full month. In this case, there is a delay of 5 months and 9 days. Part of the month i.e. 9 days will be considered as full month and hence, interest will be levied for 6 months.

Section 234 B – Interest for defaults in payment of advance tax

Interest under section 234B is levied in following two cases:

a) When the taxpayer has failed to pay advance tax though he is liable to pay advance tax; or

b) Where the advance tax paid by the taxpayer is less than 90% of the assessed tax.

Example: Mr. Max has paid advance tax of Rs. 35,000. The quantum of advance tax paid by him is 60% of the total tax liability Rs.58,400 i.e. less than 90% and hence, he will be liable to pay interest under section 234B.

Under section 234B, interest for default in payment of advance tax is levied at 1% per month or part of a month. Thus in the above instance interest will be calculated from 1st April of next financial year to the date of Payment where part of month will be considered as a full month.

Section 234 C-Interest for deferment of advance tax

Section 234C provides for levy of interest for default in payment of instalment(s) of advance tax ie. In case of taxpayers (other than those who opted for presumptive taxation scheme under section 44AD or section 44ADA), interest shall be levied-

  • If advance tax paid on or before 15th June is less than 12% of advance tax payable
  • If advance tax paid on or before 15th September is less than 36% of advance tax payable
  • If advance tax paid on or before 15th December is less than 75% of advance tax payable
  • If advance tax paid on or before 15th March is less than 100% of advance tax payable.

Interest under section 234C is levied for a period of 3 months, in case of short fall in payment of 1st, 2nd and 3rd instalment and for 1 month, in case of short fall in payment of last instalment at the rate of 1%

Example-Mr. Max is running a garments shop. Tax Liability of Mr. Max is Rs 45,500. The following details are as follows:

Scenario Date Cumulative Paid (1) Cumulative Needed to be paid (2) Shortfall (2-1)
Case1 15th June 8,000/- 6,825/-
Case 2 15thSeptember 19,000/- 20,475/- 1,475/-
Case 3 15thDecember 31,000/- 34,125/- 3,125/-
Case 4 15th March 45,500/- 45,500/-

In case 2, though there is short payment of Rs. 1,475, but Mr. Max will not be liable to pay interest under section 234C because he has paid minimum of 36% of advance tax payable by 15th September.

Whereas in Case 3, There is a short fall of Rs. 3,125. Due to short fall in case 3, interest under section 234C will be levied. Interest will be levied at 1% per month or part of the month on the short paid amount of Rs. 3,100 (i.e. Rs. 3,125 rounded off to Rs. 3,100 as per Rule 119A). Interest will be levied for a period of 3 months. In other words, interest will be levied on Rs. 3,100 at 1% per month for 3 months. Interest under section 234C will come to Rs. 93.

Author Bio

Qualification: CA in Practice
Company: Oswal & Heda Chartered Accountants
Location: Pune, Maharashtra, India
Member Since: 27 Mar 2021 | Total Posts: 14
Anubhav has over 5 years of professional experience in handling Audit & Assurance of various entities, Direct & Indirect Tax Advisory services, Project financing, Litigation Services, RERA, Preparation and Finalization of Income Tax returns, Monthly Compliance which includes GST, TDS and oth View Full Profile

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