Advance tax and penalties for indian tax
If you owe more than 5000 in taxes to the indian govt (10000 from AY2010-11) govt expects you to pay their due in advance. (Note: the tax you owe as mentioned above is total tax due after subtracting the TDS). The following is the schedule for paying the advance tax for individuals.
30% of the amount by Sept 15th
60% of the amount by Dec 15th
100% of the amount by Mar 15th
If you don't pay the amount as prescribed in the schedule govt expects you to pay interest on the delayed payments under section 234C (for deferment in payment of advance taxes). The interest is 1% per month (of the amount you paid less than required). For example if you owe Rs.10000 for the govt when you calculate your tax bill and did not pay any advance tax then the interest under 234 C will be as follows (the schedule for adv tax payment is 3k by sep15th, 6k by dec15, 10k by mar15).
3% of 3k (for 3 months sep15-dec15) - 90
3% of 6k (for 3 months dec15-mar15) - 180
1% of 10k (for 1 month mar15-mar31) - 100
Total interest payable under 234c - 370
The govt also expects you to pay interest for the less advance taxes you've paid than expected of you from the end of the previous year to the date you pay under section 234B. This is again 1% interest per month for the amount you owe. Here the govt is little liberal in saying you need to pay this interest only if you have paid less than 90% of the taxes you owe.
For the previous example (10k taxes in due) if the person files it on jul31st then he owes 4% interest (for 4 months from apr-jul) which is 4% of 10k = 400.
Total interest payable under 234B - 400
The quirk in the entire thing is govt does not consider TDS as taxes you have paid. For example if one owes 2 lakhs in tax and TDS deducted 1.9 lakhs even then govt expects you to know you've to pay 10k and calculate and pay advance taxes.
The second quirk is if you've paid advance taxes approximately (90% of the amount you owe) you won't pay any interest under 234B, but will still pay at-least 1% interest under 234C (since it expects you to have paid 100% of the amount by march15th).
The exception to the above rule is if you get unexpected income by ways of capital-gains or lottery winnings etc then the defaults under 234C can be waived provided that you paid the entire tax due on this unexpected windfall when you pay the next installment of advance taxes (by dec15/mar15 or march 31st).
30% of the amount by Sept 15th
60% of the amount by Dec 15th
100% of the amount by Mar 15th
If you don't pay the amount as prescribed in the schedule govt expects you to pay interest on the delayed payments under section 234C (for deferment in payment of advance taxes). The interest is 1% per month (of the amount you paid less than required). For example if you owe Rs.10000 for the govt when you calculate your tax bill and did not pay any advance tax then the interest under 234 C will be as follows (the schedule for adv tax payment is 3k by sep15th, 6k by dec15, 10k by mar15).
3% of 3k (for 3 months sep15-dec15) - 90
3% of 6k (for 3 months dec15-mar15) - 180
1% of 10k (for 1 month mar15-mar31) - 100
Total interest payable under 234c - 370
The govt also expects you to pay interest for the less advance taxes you've paid than expected of you from the end of the previous year to the date you pay under section 234B. This is again 1% interest per month for the amount you owe. Here the govt is little liberal in saying you need to pay this interest only if you have paid less than 90% of the taxes you owe.
For the previous example (10k taxes in due) if the person files it on jul31st then he owes 4% interest (for 4 months from apr-jul) which is 4% of 10k = 400.
Total interest payable under 234B - 400
The quirk in the entire thing is govt does not consider TDS as taxes you have paid. For example if one owes 2 lakhs in tax and TDS deducted 1.9 lakhs even then govt expects you to know you've to pay 10k and calculate and pay advance taxes.
The second quirk is if you've paid advance taxes approximately (90% of the amount you owe) you won't pay any interest under 234B, but will still pay at-least 1% interest under 234C (since it expects you to have paid 100% of the amount by march15th).
The exception to the above rule is if you get unexpected income by ways of capital-gains or lottery winnings etc then the defaults under 234C can be waived provided that you paid the entire tax due on this unexpected windfall when you pay the next installment of advance taxes (by dec15/mar15 or march 31st).
posted by Nachi at 9:32 PM
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