Advance Tax & Interest U/S 23B

Advance Tax & Interest U/S 23B

What is advance tax?

Advance Tax means paying the tax dues on the dates given by the income tax department.It will be applicable ifthe taxpayer is liable to pay the tax of Rs 10,000 or more in any financial year. If such taxpayer don’t pay or fail to pay advance tax on time or default completely, he may be liable to pay interest under section 234B and 234C.

Applicability

Advance tax is applicable to all the taxpayers even after reducing TDS deduction of Rs 10,000 or more from any sources like salary, professional income, business income etc. The advance tax is not applicable to individual who is 60 or more than 60 years old in case of not having income from business and profession.

INTEREST U/S 234B

Interest u/s 234B shall be imposed by income tax department in 2 cases first when the liability of taxpayer in any financial is 10000/- or more than 10000/- after reducing TDS deduction and he had not paid advance tax, and in other case if taxpayer is paid the advance tax but it is less than 90% of total assessed tax.

The rate of interest under section 234B is 1% of assessed tax amount on which interest is to be paid will be calculate as rounded off in that way that any fraction of a hundred is ignored and part of a month will be considered as full month. The calculation of interest can be understand by examples given below

Example: 01

TOTAL LIABILITY 50000/-
ADVANCE TAX PAID 00/-
TDS 00/-
DATE OF BALANCE TAX PAYMENT 15-JUNE

Interest calculation:

Total liability x 1% x no. of delayed month
50000 x 1% x 3(apr, may, jun) = 1500/-

Example: 02

TOTAL LIABILITY 50000/-
ADVANCE TAX PAID 42000/-
TDS 00/-
DATE OF BALANCE TAX PAYMENT 25- MAY

Interest calculation:

Advance tax is paid 42000/- which is not equal to 90% OF 50000/- i.e. 45000/-
Total tax – advance tax x 1% x no. of delayed month
50000-42000= 8000 x 1% x 2 (apr, May) = 160/-

Example: 03

TOTAL LIABILITY 150000/-
ADVANCE TAX PAID 5000/-
TDS 130335/-
DATE OF BALANCE TAX PAYMENT 25- JULY

Interest calculation:

Total tax- TDS = Assessed tax
150000-130335= 19665
Advance tax is paid 5000/- which is not equal to 90% OF 19665/- i.e. 17699/-
Assessed tax- advance tax x1% x no. of delayed month
19600(fraction of 100 ignored) -5000=14600*1% x 4(apr, May,jun,july) =584

Author Bio

Name: FCA HEENA PAWASKAR

Qualification: CA in practice

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