When is interest payable on taxes?

Rajeev, an engineer at a Bangalore-based MNC, received Form-16 from his employer last week. He gathered all the documents needed to e-file his income tax return including another Form-16 from his former employer.

He tried out ClearTax’s  income tax calculator before he began to e-file and found out there was some tax due for him this year along with interest. He wasn’t sure why there was a tax due, that too with interest, because both his employers deducted taxes before giving out salaries.

Anybody whose income taxes exceed Rs.10,000 is required to pay taxes every quarter instead of one large payment at the end of the year. In most cases, tax payments that is required to be paid by a salaried individual is taken care of by the employer through TDS.

But in cases where the employer has not deducted 90% of their taxes by the end of March, as is the case with Rajeev, or the salaried individual has a large income, then the employee is required to pay advance taxes.

The due date for advance tax payments are:

On or before 15th September Up to 30% advance tax payable
On or before 15th December Up to 60% advance tax payable
On or before 15th March Up to 100% advance tax payable

Interest accrues on tax due when you have not paid taxes at all, or in full or the TDS deducted by the employer wasn’t enough.

Interest is levied when 90% of the income taxes are not paid by the end of March. Interest is also charged when you file income tax returns after the due date. These are covered under Section 234A, 234B, 234C. Know more about it here.

A simple interest of 1% is added to the outstanding tax.  Rajeev’s total tax liability for the year was Rs. 40,170, Rs.30,000 of which was deducted by his employers.  His outstanding tax is Rs.10,170.  Interest calculated under Section 234B and Section 234C adds up to Rs. 677.

He must pay his tax dues with interest before proceeding to file his income tax returns.

Note that this interest keeps adding up till you pay. Therefore, it is advisable to pay tax due with interest sooner rather than later.

Rajeev can deposit tax due along with the interest (if any) on the government website. A challan is generated carrying the taxes paid information. These details must be filled out while preparing his income tax return.

Refer to this guide on how to pay outstanding taxes on the government website.

Received your Form 16? Upload your Form 16 and start filling out your income tax return on ClearTax now.

Write to support@cleartax.in if you have any questions about tax dues, or filing income tax returns. We’re here to answer them for you.

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