Why Interest under section 234B & 234C is charged in my Income Tax Return?

At the time of return filing, when there is tax payable in your return, do you sometimes see there is an interest which is also charged under section 234B and 234C. Let’s understand why.

Section 234B and 234C are sections for Advance payment of tax.

Interest under section 234 B and 234 C show up when –

  • You have not paid any Advance Tax & your tax payable in a year is Rs 10,000 or more.
  • You paid Advance Tax – but advance tax payments are less than 90% of (Final Tax calculated less TDS)

Do note that for salaried employees usually tax is deducted at source, therefore they need not worry about advance tax payments. On interest payments from banks on FDs, although TDS is deducted, but if your return shows tax payable, and less than 90% of it has been paid, interest under these sections may be payable.

For Freelancers or professionals, it’s important to make their advance tax estimations and payments on time to avoid this interest penalty.

As a thumb rule, to avoid Interest Penalty under Section 234B and 234C –

  • Pay advance tax when your tax liability in a year is Rs 10,000 or more
  • Advance tax payments done uptil 31st March of the year should be 90% or more of your total tax payable.

Section 234B applies when Advance Tax has not been paid and since Advance Tax is payable as per dates set out by the IT Department, 234C is applicable when interest is not paid according to these due dates. You can read in detail about 234B and 234C here.

Have questions about Advance Tax or need help to estimate your liability, reach out to us support@cleartax.in

 

 

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