The Income tax act has provisions for various fines, fees, interest and penalties for those people who default in their obligations of paying advance taxes on time, filing returns on time, depositing of TDS and other taxes within the correct period etc. In this ripple, we shall discuss the interest charged by the department for defaults in payment of Advance tax
Advance tax has to be compulsorily paid by any individual whose tax liability for any year exceeds Rs 10,000.
This section is attracted if:
OR
If this section is attracted, then the individual is charged with a simple interest of 1% per month or part of month from the 1st of April of succeeding financial year on the unpaid amount of advance tax.
Example, Mr A has prepared his return of income on the month of June, 2019 and calculated his tax liability to be Rs 3,20,000/- However, he has only deposited Rs 2,50,000/- under section 210 as advance tax to the department.
In this case, the section 234B is attracted and Mr A has to pay interest of Rs (38000 *0.01 * 3) = Rs 1,140.
(90% of Total Tax Liability - Advance Tax already deposited)
= 288000 - 25000
= 38,000