Know the penalties if you fail to pay advance tax by 15 March
- Advance tax obligations are not applicable on resident senior citizens (aged above 60 years) who do not have income from business or profession
The deadline for filing advance tax is approaching. Any person whose estimated tax liability for the year is ₹10,000 or more is required to pay advance tax. The advance tax has to be paid in four instalments in the financial year itself. The last date for paying the fourth instalment of advance tax is 15 March.
Let’s understand how to estimate advance tax and the penalties in case you don’t pay your advance tax in time.
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“A taxpayer should first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year. Thereafter the estimated tax deducted or collected at source will be deducted and the balance tax payable will be used to compute the advance tax liability," said Vivek Jalan, partner, Tax Connect Advisory Services LLP, a Chartered accountancy firm.
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The taxpayer will be liable for interest under Section 234B and 234C for default in payment of advance tax.
Interest under Section 234B is levied if the taxpayer has not deposited advance tax or if the advance tax deposited is less than 90% of the total tax liability. The taxpayer will be liable for interest under Section 234B at 1% per month or part of the month from April till the date of payment of tax.
Interest under Section 234C is levied, if advance tax paid in any instalment(s) is less than prescribed percentage of instalment amount as follows:
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The taxpayer will be liable for interest under Section 234C at 1% per month or part of the month for the period of default. The period of default is 3 months in case of shortfall in payment of 1st, 2nd and 3rd instalment and for 1 month in case of shortfall of last instalment.
Advance tax obligations are not applicable on resident senior citizens (aged above 60 years) who do not have income from business or profession.
“Section 234B is not applicable if the assessee has paid 90% or more advance tax. If any change in income due to processing of return under section 143(1) or assessment, the tax as per u/s 143(1)/assessed tax shall be taken instead of tax as per return of income (ROI) for the calculation of interest under 234B. Hence it is important to estimate the income for the year and advance tax with precision," said Jalan.
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