Provisions of section 208 make payment of advance tax mandatory for the taxpayer liable to pay a tax of INR 10,000 or more. Additionally, the income tax law also mandates the taxpayer to pay the advance tax in specified proportion (instalments). In case the taxpayer misses to pay the advance tax in specified proportion, he will be liable to pay interest under section 234C of the Income Tax Act.
Installments of advance tax vis-à-vis interest under section 234C
Percentage-wise instalments of advance tax and due date thereon are explained in the table below-
|Instalments of advance tax||Due date of payment|
|Applicable to taxpayer opted for presumptive taxation scheme under section 44AD or under section 44ADA||Applicable to any other taxpayer|
|NIL||Minimum up to 15% of the advance tax||On or before 15th June|
|NIL||Minimum up to 45% of the advance tax||On or before 15th September|
|NIL||Minimum up to 75% of the advance tax||On or before 15th December|
|Entire 100% of the advance tax||Entire 100% of the advance tax||On or before 15th March|
Notably, even though the due date for payment of 100% advance tax is 15th March. However, any income tax amount paid till 31st March is considered/ treated as advance tax.
In case the taxpayer defaults in payment of advance tax (as tabulated above). Then, he will be liable to pay interest under section 234C of the Income Tax Act.
Applicability and non-applicability of provisions of section 234C of Income Tax Act
Interest will be applicable as per provisions of section 234C in case of deferment of payment of different instalments of advance tax.
Provisions of section 234C are not applicable under the following circumstances-
1. The advance tax paid by the taxpayer on or before 15th June is not less than 12% of the advance tax payable.
2. The advance tax paid by the taxpayer on or before 15th September is not less than 36% of the advance tax payable.
3. The shortfall in the payment of advance tax is on account of any of the following-
a. Capital gain amount,
b. Income from a new business,
c. Income from winning from a crossword puzzle, lottery etc.,
d. Dividend income received from a domestic company exceeding INR 10 Lakhs.
Notably, interest under section 234C will not be applicable under the above cases provided the taxpayer pays the due taxes either in remaining pending advance tax instalments or before 31st March.
Rate of interest applicable under section 234C of the Income Tax Act-
In case of deferment of instalments of advance tax, the taxpayer will have to pay simple interest @1% per month or part thereof.
Period for which interest is leviable under section 234C–
Interest is levied for a period of three months in case of shortfall/ default in payment of 1st, 2nd or 3rd instalments. However, interest is levied for a period of one month in case of shortfall/ default in payment of the 4th instalment.
Amount on which interest is payable under section 234C-
Interest will be payable on the amount as under-
|Instalment||Amount on which interest is payable|
|First||15% of the assessed tax (-) amount of advance tax paid on or before 15th June|
|Second||45% of the assessed tax (-) amount of advance tax paid on or before 15th September|
|Third||75% of the assessed tax (-) amount of advance tax paid on or before 15th December|
|Fourth||100% of the assessed tax (-) amount of advance tax paid on or before 15th March|
Please note, assessed tax (as stated above) is a tax on total income as reduced by the following-
- The amount of TDS/ TCS,
- The amount of relief/ deduction of tax allowed under section 89 or section 90 or section 90A or section 91,
- The amount of tax credit allowed under section 115JAA or section 115JD.