Recently, many taxpayers have been surprised to find higher interest calculations under Sections 234B and 234C on their income tax intimations compared to their own computations during advance tax payments. Tax experts suggest that the current tax processing system may not be considering the actual timing of capital gains, calculating interest as if these gains existed from the start of the financial year.
What are Sections 234B and 234C?
Section 234B requires taxpayers to pay at least 90% of their total tax by the end of the financial year. Failing to do so results in a monthly interest charge of 1% on the unpaid amount, starting from April until the tax is finally paid.
Section 234C imposes a penalty of 1% per month for any deferment or shortfall in advance tax payments. Taxpayers are required to make their advance tax payments by specific deadlines throughout the year:
- By 15th June: At least 15% of total tax liability
- By 15th September: 45% of total tax liability
- By 15th December: 75% of total tax liability
- By 15th March: 100% of total tax liability
Common Issues for Taxpayers
For salaried individuals, advance tax calculations are often managed by employers through Tax Deducted at Source (TDS). However, if you have income not covered by TDS, such as capital gains from selling shares or mutual funds, you need to pay advance tax in installments. Not adhering to this requirement can result in significant interest charges under Sections 234B and 234C.
Several experts, including Himank Singla from SBHS & Associates, have pointed out that the Centralized Processing Center (CPC) may overlook the actual date of capital gains, leading to retroactive interest charges. Singla notes that the law specifies that interest under Section 234C should only apply from the date of the transaction, not from the beginning of the fiscal year.
Similarly, Gopal Bohra, Partner at Tax N.A. Shah Associates, mentions that taxpayers must provide accurate details of capital gains and dividends in their Income Tax Return (ITR) to avoid unnecessary interest charges. If there has been an error, taxpayers can file a rectified ITR under section 154 to correct it.
Complaints from Taxpayers
Recent complaints on social media platforms highlight the frustrations with these calculations:
FINALLY… ITR PROCESSED
But wait
CPC has increased interest under Section 234C compared to their earlier calculation. Same income. Same tax paid. Different interest amount.
If you’ve received your ITR Intimation,
recheck 234A / 234B / 234C carefully before assuming it’s final. Processing ≠ Always accurate. Anyone else noticed interest changes after processing? Or the ITR still pending for processing ?
- Jay Matoliya (@Jay_Matoliya) pointed out increased interest under Section 234C despite consistent income and tax paid. View Tweet
- R Loganathan (@lacaindia) noted incorrect interest calculations, including full-year 234C for presumptive taxation cases. View Tweet
How to Pay Advance Tax Online
To avoid issues with advance tax payments, follow these steps to pay online:
- Visit the official income tax e-filing website.
- Click on ‘e-Pay Tax’ found under Quick Links or use the search option.
- Enter your PAN and mobile number, validating the login with the OTP sent to your phone.
- Choose Income Tax as the tax type, select Assessment Year 2024-25, and pick Advance Tax (100) as your payment category.
- Carefully input the applicable tax amount and required details.
- Select your preferred bank and proceed to the payment gateway.
- Review all information before proceeding and keep the challan acknowledgment for your records.
Understanding these provisions can help you navigate the complexities of advance tax payments and avoid unexpected interest charges. Make sure to stay informed and compliant to effectively manage your tax obligations.