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What are the penalties for non-payment of advance tax?

What are the penalties for non-payment of advance tax?

Interest under Section 234B and Section 234C is applicable when you don’t pay your advance tax.

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.

Other applicable taxes

Value Added Tax

VAT is only applicable when there are physical goods being sold.

Service Tax

When you earn an Income from a ‘Service’, service tax is usually required to be paid by you — the provider of the service (you) have to recover this tax from the receiver of such services Add it to the total value of your service and the client has to make the payment inclusive of this tax.

Service tax rate upto 31st May 2015 is 12.36%. Let’s say your total billing to your client is Rs 75,000. Service tax on it shall be Rs 9270. You invoice your client Rs 84270 and Rs 9270 will be service tax collected from the client and which has to be deposited to the government.

Service Tax rate for financial year 2015-16 is 14% effective 1st June 2015.

If the total revenue from freelancing work is Rs.10,00,000 or less, service tax rules do not apply. However, once you cross Rs. 9,00,000 in revenue it is mandatory to apply for service tax registration. Service tax do not apply when services are exported.

What are the penalties for non-payment of advance tax?

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