Section 234C of the Income Tax Act

The Income Tax Department of India wants to make advance tax payment convenient and easy for its taxpayers. For the same, it provides the option of paying advance tax in four installments during one financial year. However, if one still defaults, then there the income tax department may impose interest penalty under Section 234C of the Income Tax Act. Basically, Section 234C is one of the three parts of Section 234 under which the interest is imposed by the Income Tax department.

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The Due Dates for Advance Tax Payments

The IT department wants on-time payment of the taxes by taxpayers; otherwise, it may charge interest on the late payments when one files income tax returns. The advance tax can be paid on the below-mentioned dates:

Before or On	In the situation when all the taxpayers other than taxpayer choosing presumptive income under section 44AD	The taxpayers choosing presumptive income under section 44AD
June 15^th	Up to 15percent of the payable advance tax	NIL
September 15^th	Up to 45 percent of the payable advance tax	NIL
December 15^th	Up to 74 percent of the payable advance tax	NIL
March 15^th	Up to 100 percent of the payable advance tax	Up to 100 percent of payable advance tax

Interest imposed under Section 234C

The interest for late payment of the advance tax is set as 1 percent of the total due amount. This amount is calculated from the above mentioned cut-off dates to the actual payment of the taxes that are outstanding.

Interest calculation under Section 234C when the taxpayer other than the one who is opting for presumptive income under Section 44AD:

	Interest Rate	Interest Period	Amount of Interest Calculation
If the paid advance tax on or before 15^th June is less than 15% of the total payable amount*	Simple interest is applied at the rate of 1% each month	3 months	15% of the Amount* (-) minus the tax amount that is deposited before 15^th June
If the paid advance tax on or before 15^th September is less than 45% of the total payable amount*	Simple interest is applied at the rate of 1% each month	3 months	45% of the Amount* (-) minus the tax amount that is deposited before 15^th September
If the paid advance tax on or before 15^th December is less than 75% of the total payable amount*	Simple interest is applied at the rate of 1% each month	3 months	75% of the Amount* (-) minus the tax amount that is deposited before 15^th December
If the paid advance tax on or before 15^th March is less than 100% of the total payable amount*	Simple interest is applied at the rate of 1% each month	-	100% of the Amount* (-) minus the tax amount that is deposited before 15^th March

Here the amount on which the % of the advance tax is needed to be calculated = Tax on the Total Income (minus) TDS (minus) relief under section 90 or 91 (minus) tax credit under section 115JD.

Note: Some of the points to be noted here are:

No interest is levied on the taxpayer if there is any kind of shortfall in the payment of the advance tax due to the winnings or capital gains through lottery or gambling.
If the tax is paid is on account of failure or underestimation to estimate the capital gains or some speculative income such as income from gambling or income through lottery.
If the taxpayer has paid the full tax payable on the mentioned income while paying the rest of the installments of due advance tax or if there is not any due of installment, then the taxpayer pays these taxes before completion of the financial year.

Illustrations to Understand Section 234C

Let us assume that the total tax liability of an individual for a financial year is Rs.100, 000 and it is required to be paid in installments as mentioned in the above tables. However, we are assuming that there is no deduction of TDS here.

If one makes partial payments, then he/she is liable to pay the interest according to the last column of the below table:

Date of Payment	Payable Advance Tax	Total Paid Advance Tax	Cumulative Shortfall	Cumulative Penalties
June 15^th	15, 000	5, 000	10, 000	1% * 3 * 10, 000 = 300
September 15^th	45, 000	20, 000	25, 000	1% * 3 *25, 000 = 750
December 15^th	75, 000	40, 000	35, 000	1% * 3 * 35, 000 = 1050
March 15^th	1, 00, 000	50, 000	50, 000	1% * 1 * 50, 000 = 500

Total Payable Interest = Rs.2600

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