Under the Income Tax Act, there is a provision for payment of Advance Tax. Any tax payer who has to pay total tax on their total income is more than Rs. 10,000, has to pay tax in advance under 4 instalments, i.e. before 15th March, 15th September, 15th December and 15th March of financial year. Advance tax is calculated under section 209 on the current income shall be payable in four instalments during the financial year. Under section 211(1)(a), the due date of payment and the amount payable in each instalment during financial year, in the following table:
| Due Date of Instalment | Amount Payable |
| On or before the 15th June | Not less than 15% of such advance tax |
| On or before the 15th September | Not less than 45% of such advance tax as reduced by the amount, if any, paid in the earlier instalment |
| On or before the 15th December | Not less than 75% of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments |
| On or before the 15th March | The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments |
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| Description | Amount (Rs.) |
| Presume Gross Total Income | 7,00,000 |
| Deduction under section 80C | 50,000 |
| Income subject to advance tax | 6,50,000 |
| Tax Payable on Rs. 6,50,000 | 44,200 |
| Less Tax Deducted at Source | 8,200 |
| Advance Tax Payable for Assessment Year 2024-25 | 36,000 |
| Advance Tax Paid on 15.06.2023 | 16,000 |
| Tax payable under section 140A | 20,000 |
Along with interest there on u/s 234C and 234B at the rate of 12%
Till the date of submitting return of income.
- In the case of an assesse who declares profits and gains in accordance with the provisions of Section 44AD (1) or Section 44ADA (1), as the case may be.
If any assesse has paid advance tax in excess of tax payable, will get refund of the excess tax paid and also he is entitled to get interest @ 6% per annum.
The same provision is applicable, in the case of Tax Deducted At Source, i.e. if amount of TDS is higher than the tax payable, excess amount will considered as refund, along with interest @6% per annum.
If an assesse has paid advance tax less than the tax payable, he has to pay the tax before submitting his return of income along with interest thereon at the rate of 12%.
From the above discussion, we find that
Interest payable by the assesse on short payment of advance tax is @12% while assesse is entitle for interest on refund @6% p.a.
That means department will levy interest @12% while giving interest @6%. WHY?
Interest, chargeable for defaults in and receivable for, payment of advance tax:
Interest chargeable for defaults in payment of advance tax:
As per section 234B of the Income Tax Act, where the assesse fails to pay advance tax which is liable to pay u/s 208 or, where the advance tax paid under the provision of section 210 is less than 90% of the assessed tax, he shall be liable to simple interest (which is mandatory) at the rate of 1% for every month or part of a month, comprised in the period from 1st April next following the financial year in which the advance tax was payable, to the date of determination of total income u/s 143(1) and where the regular assessment is made, to the date of such regular assessment. The interest shall be chargeable on the entire amount of the assessed tax for failure to pay advance tax or, as the case may be, on the difference between the assessed tax and the advance tax paid u/s 210.
Interest payable for different of advance tax:
As per Section 234C of the Income Tax Act, if all the 4 instalment of advance tax at prescribed percentage is not paid interest at the rate of 12% is to pay.
Where such an assesse, which is liable to pay advance tax u/s 208 has failed to pay such tax or the advance tax paid by such assesse on its current income:
(1) On or before 15th June, on or before 15th September, or on or before 15th December, is less than 15% or 45% or 75%, respectively, of the “tax due on the returned income”, then, the such assesse shall be liable to pay simple interest at the rate of 1% per month for a period of three months on the amount of the shortfall from 15% or 45% or 75%as the case may be, of the tax due on the returned income.
(2) On or before 15th March is less than the “tax due on the returned income”. Then. The assesse shall be liable to pay simple interest at the rate of 1% on the amount of the shortfall from the “tax due on the returned income”.
Interest on Refund: Section 244A:
Where refund is on account of excess payment of advance tax or tax collected at source or tax deducted at source, the period for which such interest is to be allowed commence from 1st April of the relevant assessment year to the due on which the refund is granted. The delay, if any, in granting refund, if attributable to the assesse, then such period will be reduced from this period. The rate of interest is @ one-half percent for every month or part thereof. No interest will be, however, be payable if amount of refund is less than 10% of tax as determined u/s 143(1) or on regular assessment.
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I have filed TDS return FY2023-24, for an annual salary of Rs. 504000 (before standard deduction 50k), with a deduction of Rs. 2000. But traces, demand with default that I must deduct Rs. 10608. In fact, below Rs. 7 lacs income, there is no tax under new regime right?
Also for an annual salary of Rs.21,60,000 (before stand deduction 50k), I have deducted Rs.3,20,000 TDS incl Cess under new regime. But they are demanding more Rs.1,27,000 saying short deduction, which totals to Rs.4,47,000 TDS for a gross salary of Rs.20,60,000(after deducting 50k for sec 16ia and 50k for NPS).
Can someone pls clarify on what % are they making these calculations ?