Failure to pay advance tax attracts interest under section 234c of the IT Act

Income and tax liability thereon are estimated for the year and then a specified percentage of the tax liability is paid on each due date during the year.

In case of default in payment of advance tax on due date, interest u/s 234B and 234C will be charged as applicable. Interest under section 234B is payable when advance tax paid is less than 90% of the tax payable. Interest under section 234C is payable for late payment of advance tax.

For salaried persons whose tax is deducted at source, there is no need to pay advance tax unless they have some other source of income like capital gains, interest income, rental income etc.

For example, Kavita earns income from her salary. 8 lakh and his employer has deducted the required TDS (tax deducted at source). she sells shares worth 5 lakh as on 30 June 2021 and earns a short-term capital gain of 2.5 lakhs.

Once, capital gain is generated, it should be considered for payment of advance tax on or before the next due date, in this case, payment of advance tax on capital gain due dates of 15th September, 15th December and 15th March should be done for. ,

Tax liability of Kavita on short-term capital gains of 2.5 lakhs 39,000 (@15% plus cess). If Kavita has not paid any advance tax so far, she can pay the total tax due 39,000 on or before March 31 and avoid interest under section 234B.

However, interest under section 234C will still be payable for late payment of advance tax as he has delayed payment of advance tax.

Net tax liability to be considered after considering all deductions, exemptions under Income Tax Act, and credit to the extent of TDS, Tax Collected at Source (TCS), Minimum Alternate Tax (MAT) utilization for determination of advance tax liability Is.

For example, Anita’s income from professional services is 1.2 million. he has paid the insurance premium of 1.5 lakh. TDS of 50 thousand has been cut.

Anita’s total tax liability after considering deduction under section 80C for insurance premium is 1,32,600 of which 50,000 TDS has been deducted. Accordingly, Anita’s net tax liability remains the same 82,600 and he should pay advance tax at the specified percentage on the respective due dates.

Now, for example, Akash earns income from the salary of 12 lakh and his employer has deducted the required TDS. Akash earned interest on fixed deposit 25,000. Interest income is taxed @ 30% plus cess 7,800. Aakash believes that he need not pay advance tax on interest income as the net tax liability is less than 10,000. In such a situation, this belief of the sky is correct.

Now, for example, Samrat is a NRI who earns rental income 15 lakhs from house property in India. Hence, his tax liability for the financial year 2021-22 is estimated at 1,32,600. The emperor attained the age of 60 on 31 December 2021. He holds that he is not liable to pay advance tax as he is a senior citizen and has no income from business or profession. This belief of the emperor is not correct as he is a non-resident Indian and hence will not be exempted from payment of advance tax. This benefit is available only to a resident senior citizen who does not have income from business or profession.

As we near the end of this financial year, if you have earned any long term / short term capital gain and want to save tax on it, you can consider booking capital loss arising due to the prevailing market condition. Huh. Closed against existing capital gains.

Accordingly, there will be no tax liability on capital gains and there will be no question of advance tax liability. It is worth noting that long-term capital losses can only be adjusted against long-term capital gains. Short term capital loss can be set off against long term / short term capital gain.

Nitesh Buddhadev is the founder of Nimit Consultancy.