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Interest Imposed by the I-T Department – Section 234B

Interest Imposed by the I-T Department – Section 234B

What is Advance Tax?

If you are liable to pay more than Rs 10,000 in taxes in a financial year, advance tax may be applicable to you.
Advance Tax means paying your tax dues based on the dates (usually quarterly) provided by the income tax department. If you don’t pay advance tax, you may be liable to pay interest under section 234B.

Who needs to pay Advance Tax?
All assesses including salaried employees, self-employed professionals, businessmen etc. are required to pay Advance Tax where the tax payable is Rs 10,000 or more.

Advance Tax is NOT applicable when –

  • Effective AY 2011-12 – When a taxpayer opts for the scheme of computing business income under section 44AD on presumptive basis @ 8% of turnover, such taxpayer shall be exempted from payment of advance tax for such business.
  • Effective AY 2013-14 – A senior citizen (resident individual who is 60 yrs or more) who does not have any income from business & profession, is not liable to pay advance tax.

Late Payment Interest

Here are the two situations in which interest is applicable –

    • You tax liability for the financial year is more than Rs 10,000 and you did not pay any advance tax.

OR

  • You paid advance tax but advance tax paid is less than 90% of ‘assessed tax’

In any one of the cases interest under section 234B shall be applicable.

Interest is calculated @ 1% on Assessed Tax less Advance Tax.

Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

Interest Imposed by the I-T Department – Section 234B

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