Simply Put. Section 234: What happens if you miss the tax deadline(s)

Bhadra and Anu catch up over a cup of coffee and an interesting conversation follows:

Anu: I am getting constant messages to file ITR and in March I was getting such prompts to deposit advance tax instalment. Is it a big deal if I miss the deadline?

Bhadra: It is no big deal, you just have to pay interest u/s 234(A, B, C). The interest charged under these sections is simple Interest of 1 per cent per month or part of the month i.e., 1 month and 15 days will be considered as 2 months.

Anu: Really! What are these sections and what do they entail?

Bhadra: Section 234A of the Income Tax Act states that if the Income tax return is not filed by due date, then interest will be levied from the day after the due date till the date of filing the return on the tax liability (assessed tax-advance tax-TDS/TCS).

Anu: Penalty may be significant when tax liability is higher. What about the other sections?

Bhadra: Section 234B deals with the penalty when advance tax is not paid (by March 31) or the advance tax paid is less than 90 per cent of the assessed tax. The period of levy is from the first day of assessment year i.e., April 1 to the date when the balance of advance tax is paid.

The interest is levied on Assessed tax lessAdvance tax paid (if any). Consider this, if you have advance tax liability of ₹50,000 for this year and advance tax paid is ₹46,000, there will be no interest because the tax paid is higher than 90 per cent of advance tax liability. Instead of this, if the advance tax paid is ₹40,000 only and the balance ₹10,000 is paid on May 30, then the penalty of 1 per cent would be charged on ₹10,000 (₹50,000-₹40,000) for 2 months.

Anu: Understood, but what about section 234C then?

Bhadra: Section 234C also deals with the non-payment of advance tax instalment but unlike section 234B it is charged in the previous year alone. The due dates for advance tax instalments are every 15th of June (15 per cent of advance tax liability), September (45 per cent), December (75 per cent) and March (100 per cent). This section states that interest will be charged if the advance tax payment for the instalments is less than 12 per cent, 36 per cent, 75 per cent and 100 per cent respectively. The interest is charged on the shortfall of advance tax payment in each instalment for a period of 3 months for first three instalments and 1 month for last instalment.

Anu: These provisions are quite reasonable; it is better to meet deadlines and avoid penalty.

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