Interest on Late Deposit
What does Advance Tax payment mean?
It means payment of the tax dues on the stipulated time provided by the Income Tax Department.
What happens if a person fails to pay the Advance Tax?
If a person fails to pay this tax or if he/she pays the amount less than 90% of the assessed tax, then he/she is liable to interest payment under Section 234B. Under this section, interest for default in the payment of advance tax is
The interest is levied on the amount of unpaid tax/the amount by which the advance tax is short paid. The amount of interest on the amount of unpaid/short paid tax is computed as follows:
Assessed Tax – Advance Tax Paid = Amount of unpaid/short – paid Advance Tax
The period on which the interest is charged starts from 1st April till the date of income. If the taxpayer has paid a part of the tax before the completion of an assessment, then the interest is calculated up to the date of payment of self-assessment tax.
Let us understand this with the help of an example-
Suppose Mr. Y has a total tax liability of Rs. 35,000 and he pays this amount on 15th July while filing the return. So, he is liable to pay the interest because he has delayed his payment. Therefore, the interest will be:
Interest=Rs. 35,000 x .01 X 4
= Rs. 1,400
Thus, Mr. Y is liable to the payment of interest of Rs. 1,400 along with the total tax liability under Section 234B.
For any help on ITR Filing feel free to consult the tax experts at Taxraahi. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, and Bulk Return.