What is 234B and 234C of Income Tax Act?

How do you calculate 234B and 234C?

If the payment falls short of 90% of the tax required to be paid, the interest under section 234B shall be charged. Hence there is a shortfall of payment. 3.

Interest on defaults in payment of Advance tax – Section 234B of the Act.

On or before 15th March 100% of advance tax

What is 234B 234C?

Under section 234B, interest for default in payment of advance tax is levied at 1% per month or part of a month. The nature of interest is simple interest. In other words, the taxpayer is liable to pay simple interest at 1% per month or part of a month for default in payment of advance tax.

What is interest under 234B and 234C?

In any one of the above cases, interest under section 234B shall be applicable. Interest is calculated @ 1% on Assessed Tax less Advance Tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

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HOW IS 234C interest calculated?

Calculation of Interest under section 234C when the taxpayer is not opting for presumptive income under section 44AD. … The rate of interest will be charged @ 1% per month for three months. The amount on which interest is calculated is 15% of the amount less tax already paid before the dates.

What is difference between 234B and 234C?

Under Section 234B, the taxpayer must pay at least 90% of the tax that is due to be paid at the end of the financial year. … The taxpayer has the provision to pay his tax in the form of 4 instalments. Under Section 234C, a penalty is imposed if the tax payment is delayed.

Who pays advanced tax?

Liability to pay advance tax

As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”.

When 234C interest is applicable?

Interest under section 234C is levied for a period of 1 month in case of short fall in payment of the last installment and for a period of 3 months in case of short fall in payment of 1st, 2nd and 3rd installments.

What happens if advance tax is not paid?

The taxpayer will be liable for interest under Section 234B and 234C for default in payment of advance tax. Interest under Section 234B is levied if the taxpayer has not deposited advance tax or if the advance tax deposited is less than 90% of the total tax liability.

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Why do we pay advance tax?

Also called ‘pay-as-you-earn’ scheme, advance tax is the income tax payable if your tax liability is more than Rs 10,000 in a financial year. … By paying in advance, you help the government and also yourself by not finding it hard to pay the whole tax at one go at the end.

How is tax interest calculated?

Calculating Interest Penalty

  1. 1% interest rate per month for a period of 3 months is computed for advance tax less than 30% of the amount on or before September 15.
  2. In case advance tax is paid on or before December 15 is less than 60% of the taxable amount, interest of 1% for a period of 3 months is levied.

How advance tax is calculated with example?

Advance tax can be calculated by applying the slab rate applicable to a financial year on his total total estimated income for that year. For example your total income for FY 2018-19 is Rs. 5,50,000, then your estimated liability is Rs. 23,400 calculated as follow.