A delay of one day result in levy of interest for 3 months

 951 total views

A delay of one day result in levy of interest for 3 months

A delay of one day result in levy of interest for 3 months may sound illogical but this is the fact.

Advance tax is payable in four installments as under:

Payment Due Date Advance Tax for Assessees other than those who are covered under section 44AD Advance Tax for Assessees who are covered under section 44AD
On or before 15 June 15% of the Net Tax Liability
On or before 15 September 45% of the Net Tax Liability
On or before 15 December 75% of the Net Tax Liability
On or before 15 March 100% of Net Tax Liability 100% of Net Tax Liability

Advance tax is payable by all categories of taxpayers be it companies, firms, societies, individuals, etc if the net tax liability (tax after TDS/TCS) for the year exceeds ₹10,000/-. However, Senior citizens who do not carry on a business or profession are exempt from the payment of advance tax.

It may be noted that the interest is normally leviable @ 1% if there is a default in payment of installment of advance tax. But, interesting part is that even if the delay is of a single day, the interest will be applicable for 3 months. For example, a person has paid the advance tax first installment on 16th June instead of 15th June, so even if the delay is of just one day, interst would be 3%.

Let us read section 2344C wherein the relevant part is highlighted for the benefit of the readers:

Interest for deferment of advance tax.

234C. (1) Where in any financial year,—

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

(i) the advance tax paid by such assessee 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 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 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 assessee on the 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 if the advance tax paid by the assessee on the 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, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates;

Section 234C of the Act is very clear and there is no provision for calculation of interest for the period of default. It is for a period of 3 months even if the default is for a single day. There is no ambiguity and confusion. The literal interpretation of the law makes it clear that the provision is illogical but the fact remains, law & logic are often strangers.

Leave a Comment

Your email address will not be published.

the taxtalk

online portal for tax news, update, judgment, article, circular, income tax, gst, notification Simplifying the tax and tax laws is the main motto of the team tax talk, solving