1. The deadline for filing Income Tax Returns is fast approaching. Although the due date for non-audit taxpayers has been extended to September 15, 2025, it is advisable not to wait, at least for tax payment, until the due date of ITR filing. Delaying tax payment until the return filing date may result in additional interest charges under Sections 234B and 234C of the Income Tax Act. Let us try to understand this with the help of an Illustration.
2. Illustration: Mr. Anupam is a salaried individual with a gross salary of Rs.7,75,000. Since his net tax liability was nil (after availing of the Section 87A rebate), his employer did not deduct any tax at source (TDS) from his salary.
However, Mr. Anupam also earns Rs.1,50,000 from interest income, from which the bank has deducted TDS at 10%.
His tax liability for the financial year 2024–25 is calculated as follows:
| Sl. | Particulars | Amount (Rs.) | Amount (Rs.) |
| (a) | Net Salary Income (after Std Ded) | 7,00,000 | |
| (b) | Income from Interest | 1,50,000 | |
| (c ) | Total Taxable Income (a+b) | 8,50,000 | |
| (d) | Income Tax on (c) | 35,000 | |
| (e ) | Health & Education Cess @4% on (d) | 1,400 | |
| (f) | Total Tax on Income (d+e) | 36,400 | |
| (g) | Tax deducted at the source | 15,000 | |
| (h) | Balance Tax Payable (f-g) | 21,400 |
3. Mr. Anupam remained unaware of his tax liability of Rs. 21,400 and did not pay by 31st March 2025. As a result, he is liable to pay interest under Section 234B until the date the tax is paid. Any further delay in payment — especially postponing it until the ITR due date — will only lead to a higher interest outgo. The interest under Section 234B continues to accrue for each month of delay until the tax is fully paid.
4. Section 234B mandates interest on taxpayers who fail to pay advance tax or pay less than 90% of their assessed tax. This interest is calculated at 1% per month or part thereof on the unpaid amount. The interest period begins on April 1st, the day following the financial year’s end, and continues until the actual payment date.
5. The calculation below will explain how the postponing payment until the ITR deadline can lead to a substantial increase in interest liability.
| Particulars | Amount (Rs.) | No. of Months | Interest @1% per month | ||
| Paid in June 2025 | Wait till Sep 2025 | Paid in June 2025 | Wait till Sep 2025 | ||
| Balance Tax Payable | 21,400 | 3 | 6 | Rs. 642 | Rs. 1296 |
6. In fact, it is advisable to pay advance tax on estimated income from other sources within the prescribed due dates to avoid interest under Section 234C. This section levies interest on taxpayers who delay the payment of advance tax instalments. Advance tax is to be paid in four scheduled instalments during the financial year, and failure to meet these deadlines attracts interest liability under Section 234C.
7. Computation of Interest under Section 234C, payable by Mr. Anupam is computed as follows:
|
Advance Tax Due |
Amount Payable (Rs.) | Interest @1% for 3 months (Amount in Rs.) | |
| On or before 15 June 2024 (15% of Tax) | (15% * 21400) | 3210 | 96 |
| On or before 15th Sept 2024 (45% of Tax) | (45%*21400) | 9630 | 289 |
| On or before 15th Dec (75% of Tax) | (75% * 21400) | 16050 | 482 |
| On or before 15th Mar (100% of Tax) | (100%*21400) | 21400 | 214 |
| Total Interest under section 234C | 1081 | ||
| The last instalment is due on 15th March and a shortfall means, delayed payment only for the remaining part of the month. That’s why interest is charged @ 1% for one month only. | |||
8. Section 234C will not be applicable if the shortfall in payment on advance tax in any instalment is due to under-estimation or failure to estimate (a) Capital Gain amount (b) Income from winning from lotteries, crossword puzzle, etc (c) Income from a new business etc.
9. Conclusion: Although the due dates have been extended and the utilities for ITR-2 and ITR-3 are yet to be enabled on the portal, it is strongly recommended to compute tax liability at the earliest and pay any outstanding dues without delay. Acting promptly not only helps avoid unnecessary interest but also ensures peace of mind and compliance with tax regulations.
Disclaimer: The article is for educational purposes only.
The author can be approached at caanitabhadra@gmail.com
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