As you prepare to file your return and pay the due tax, are you surprised to see a couple of hundreds charged as interest under Section 234B of the Income Tax Act? Let's understand this interest and why it is charged in your tax return.
What is advance tax?
For those who have a tax liability in excess of Rs 10,000 in a financial year, the Income Tax Department requires them to pay advance tax. Advance tax means paying your tax dues in instalments on the dates (usually quarterly) provided by the I-T department. If you are salaried and your total income is largely from salary, barring a small amount earned as interest, it is likely all your taxes have been taken care of by TDS (tax deducted at source). Your employer deducts TDS and banks also deduct TDS on interest income. But if during the year you have earned income under any other head you may have to pay advance tax. For example, you may be salaried but if you have rental income, you must check whether tax paid by you is sufficient or not and pay advance tax as per percentages and dates laid out by the tax department.
If you don't pay advance tax, you may be liable to pay interest under Section 234B.
Who needs to pay advance tax
All assesses including salaried employees, freelancers, businessmen etc. are required to pay advance tax where the tax payable is Rs 10,000 or more.
Interest applicability and calculation
Here are the two situations in which interest is applicable -
As you prepare to file your return and pay the due tax, are you surprised to see a couple of hundreds charged as interest under Section 234B of the Income Tax Act? Let's understand this interest and why it is charged in your tax return.
What is advance tax?
For those who have a tax liability in excess of Rs 10,000 in a financial year, the Income Tax Department requires them to pay advance tax. Advance tax means paying your tax dues in instalments on the dates (usually quarterly) provided by the I-T department. If you are salaried and your total income is largely from salary, barring a small amount earned as interest, it is likely all your taxes have been taken care of by TDS (tax deducted at source). Your employer deducts TDS and banks also deduct TDS on interest income. But if during the year you have earned income under any other head you may have to pay advance tax. For example, you may be salaried but if you have rental income, you must check whether tax paid by you is sufficient or not and pay advance tax as per percentages and dates laid out by the tax department.
If you don't pay advance tax, you may be liable to pay interest under Section 234B.
Who needs to pay advance tax
All assesses including salaried employees, freelancers, businessmen etc. are required to pay advance tax where the tax payable is Rs 10,000 or more.
Interest applicability and calculation
Here are the two situations in which interest is applicable -
As you prepare to file your return and pay the due tax, are you surprised to see a couple of hundreds charged as interest under Section 234B of the Income Tax Act? Let's understand this interest and why it is charged in your tax return.
What is advance tax?
For those who have a tax liability in excess of Rs 10,000 in a financial year, the Income Tax Department requires them to pay advance tax. Advance tax means paying your tax dues in instalments on the dates (usually quarterly) provided by the I-T department. If you are salaried and your total income is largely from salary, barring a small amount earned as interest, it is likely all your taxes have been taken care of by TDS (tax deducted at source). Your employer deducts TDS and banks also deduct TDS on interest income. But if during the year you have earned income under any other head you may have to pay advance tax. For example, you may be salaried but if you have rental income, you must check whether tax paid by you is sufficient or not and pay advance tax as per percentages and dates laid out by the tax department.
If you don't pay advance tax, you may be liable to pay interest under Section 234B.
Who needs to pay advance tax
All assesses including salaried employees, freelancers, businessmen etc. are required to pay advance tax where the tax payable is Rs 10,000 or more.
Interest applicability and calculation
Here are the two situations in which interest is applicable -
- Your tax liability for the financial year is more than Rs 10,000 and you did not pay any advance tax
- You paid advance tax but advance tax paid is less than 90 per cent of 'assessed tax'
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