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Interest for Deferment of Advance Tax – Sec 234C

Interest is payable by assessee under section 234C for non payment or under payment of advance tax.

Rate of Interest – Simple Interest @ 1% per month or part of month

Interest is calculated  by Non Corporate Assessee as provided under:-

Interest is Payable
under Sec 234C if
Period of Interest Amount on which
Interest Payable
Advance tax paid on or before
15th September is less than 30% of
tax on returned income
3 months 30% of tax on returned income – a
Advance tax paid on or before
15th December is less than 60% of
tax on returned income
3 months 60% of tax on returned income – b
Advance tax paid on or before
15th March is less than 100% of
tax on returned income
100% of tax on returned income – c

Tax on returned Income means the tax chargeable on the total income declared in the return of income furnished by the assessee as reduced by the amount of,—

 (i)  any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(ii) any relief,deduction or tax credit allowed under section 90, 90A, 91, 115JAA or 115JD.

a) Amount of advance tax paid on or before 15th September of financial year.

b) Amount of advance tax paid on or before 15th December of financial year.

c) Amount of advance tax paid on or before 15th March of financial year.

Interest is calculated  by a Corporate Assessee as provided under:-

Interest is Payable
under Sec 234C if
Period of Interest Amount on which
Interest Payable
Advance tax paid on or before
15th June is less than 12% of
tax on returned income
3 months 15% of tax on returned income – a
Advance tax paid on or before
15th September is less than 36% of
tax on returned income
3 months 45% of tax on returned income – b
Advance tax paid on or before
15th December is less than 75% of
tax on returned income
3 months 75% of tax on returned income – c
Advance tax paid on or before
15th March is less than 100% of
tax on returned income
100% of tax on returned income – d

Tax on returned Income means the tax chargeable on the total income declared in the return of income furnished by the assessee as reduced by the amount of,—

 (i)  any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(ii) any relief,deduction or tax credit allowed under section 90, 90A, 91, 115JAA or 115JD.

a) Amount of advance tax paid on or before 15th June of financial year.

b) Amount of advance tax paid on or before 15th September of financial year.

c) Amount of advance tax paid on or before 15th December of financial year.

d) Amount of advance tax paid on or before 15th March of financial year.

Interest Not Payable

Interest is not payable if the shortfall in the payment of advance tax is on account of under-estimate or failure to estimate

  • the amount of capital gains
  • income of nature referred in sec 2(24)(ix) (i.e lottery income, gambling income etc.)

and the assessee has paid the whole of the amount of tax payable in respect of such income as part of the remaining installments of advance tax which are due or where no such installments are due, by the 31st March of the financial year.

Also Read  :  Advance Income Tax

Bare Act for Sec 234C

Bare Act for Sec 234C

(1) Where in any financial year,—

(a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or—

 (i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income;

(ii) the advance tax paid by the company on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income:

Provided that if the advance tax paid by the company on its current income on or before the 15th day of June or the 15th day of September, is not less than twelve per cent or, as the case may be, thirty-six per cent of the tax due on the returned income, then, it shall not be liable to pay any interest on the amount of the shortfall on those dates;

(b) the assessee, other than a company, who is liable to pay advance tax under section 208 has failed to pay such tax or,—

 (i) the advance tax paid by the assessee on his current income on or before the 15th day of September is less than thirty per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent per month for a period of three months on the amount of the shortfall from thirty per cent or, as the case may be, sixty per cent of the tax due on the returned income;

(ii) the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent on the amount of the shortfall from the tax due on the returned income :

Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under-estimate or failure to estimate—

(a) the amount of capital gains; or

(b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2,

and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the remaining instalments of advance tax which are due or where no such instalments are due, by the 31st day of March of the financial year:

Provided further that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000 (1 of 2001), and the assessee has paid the amount of shortfall, on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and the 15th day of December, 2000 :

Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000) as amended by the Taxation Laws (Amendment) Act, 2001 (4 of 2001) and the assessee has paid the amount of shortfall on or before the 15th day of March, 2001 in respect of the instalment of advance tax due on the 15th day of June, 2000, the 15th day of September, 2000 and 15th day of December, 2000.

Explanation.—In this section, “tax due on the returned income” means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of,—

 (i)  any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;

(iii)  any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;

(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and

(v)  any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD.

(2) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.

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