Missed Advance Tax Deadline? Here's How Salaried Employees Can Avoid Interest Charges
Salaried employees who miss the advance tax deadline may face interest charges under Sections 234B and 234C of the Income Tax Act.
For taxpayers with an annual income tax liability exceeding Rs 10,000, advance tax payments are a legal obligation. They are usually made in four instalments throughout the financial year. But salaried individuals often bypass this requirement as their tax liability is deducted at source (TDS) by their employers.
Difficulties arise when unexpected additional income is earned during the year, which could lead to a shortfall in TDS deductions and subsequent interest penalties.
Salaried employees are required to pay advance tax only if their total tax liability exceeds Rs 10,000 after TDS deductions. While TDS ensures compliance for most, any additional income — such as freelance earnings, rental income or investment gains — may not be accounted for by the employer.
If advance tax on such income is not paid on time, the taxpayer may face interest under Section 234C for late payment and under Section 234B for non-payment after the financial year ends.
The due date for advance tax payment for the fourth quarter of the financial year 2024-25 was Mar. 15, 2025. Missing this deadline usually triggers interest charges, but there is a way for salaried employees to avoid these penalties.
How To Avoid Interest Under Section 234C?
If a salaried person realises they have additional taxable income after the advance tax deadline has passed, they still have an opportunity to avoid interest penalties by acting before Mar. 31. The important thing is to request an additional TDS deduction through the employer.
Employers usually calculate TDS based on initial income declarations made by employees at the beginning of the financial year. If this estimated tax liability changes due to additional income, the employee has two choices:
Pay advance tax independently. But if done after the Mar. 15 deadline, interest under Section 234C may apply.
Request an increased TDS deduction before Mar. 31. Employers are permitted to adjust TDS calculations for the final payroll cycle. If the additional tax liability is covered within the March salary’s TDS deduction, interest under Section 234C can be avoided.
Employer’s Role In TDS Adjustments
Under tax regulations, employers can modify TDS deductions at any point during the financial year, provided the declaration is made within their payroll processing deadlines. If an employee declares their additional income on Mar. 16, for example, and the employer adjusts the March salary’s TDS deduction accordingly, the employee may not need to pay any advance tax separately and can avoid Section 234C interest.
However, this method comes with limitations. The March salary must be high enough to accommodate the additional TDS deduction. If not, the remaining tax liability will have to be settled independently, potentially incurring interest charges.
Challenges In Employer Cooperation
Though there are no legal restrictions preventing employers from adjusting TDS at the last minute, many organisations set internal deadlines for tax declarations. If an employer has already processed March’s payroll or refuses to accommodate last-minute requests, the employee may have no choice but to pay advance tax separately and bear the associated interest costs.
Employers are generally obligated to deduct TDS only on salary income. While they can consider additional income declared by employees, they are not required to adjust for all types of earnings, except in cases where losses from house property can be offset against taxable income.
