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Penalty for non payment of advance tax in time - salaried

Anil (1638 Points)

03 July 2012

Is penlty leviable on SALARIED person for non payment of advance tax in time as per slabs prescribed?

(Normally TDS is deducted by company evenly throught the year. But due to oversight / negligence company may deduct the whole of TDS amount out of employee's salary during the month of March and remitt it to Department. Hence this question.)

Kindly quote section / rules whenever possible.

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CA Sripal Jain (Associate Finance) (709 Points)
Replied 03 July 2012

Penalty for Non Payment Of advance Tax .(section 234B)

Well, there are penalties in the form of interest payments to the taxman. But before worrying about penalties, find out if you are liable to pay advance tax. You don’t have to pay tax in advance if your tax liability is less than Rs 10,000 after reducing the tax deducted at source (TDS) from the total tax payable.

If you don’t pay advance tax at all or if the aggregate paid by March 31 is less than 90 per cent of the total tax payable, you will have to pay an interest of 1per cent per month on the deficit amount from April 1 of the following year till the date you file your return

Where tax is paid by the assessee under section 140A or otherwise,-up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax.

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CA Sripal Jain (Associate Finance) (709 Points)
Replied 03 July 2012

If you don’t pay an advance tax instalment in full, you have to pay interest at 1 per cent a month for three months on the amount that falls short of the required payment. However, in the case of default on the last instalment (March 15), the penal interest of 1 per cent is chargeable for only a month.

Let’s illustrate this with an example. Let’s say you are an individual taxpayer and are liable to pay Rs 10,000 by way of advance tax. Suppose you pay Rs 9,500 in three instalments (Rs 3,000 on September 14, Rs 2,000 on December 15, and Rs 4,500 on March 15), would you have kept to your payment schedule?

There will have been be no default in respect of the first instalment (Rs 3,000, which is 30 per cent of Rs 10,000).
The second instalment amount should, however, have been Rs 3,000 (60 per cent of Rs 10,000, less Rs 3,000 paid in the first instalment). Hence, the shortfall is Rs 1,000, on which the interest payable is Rs 30 (1 per cent of Rs 1,000 for three months).
Since the third instalment is Rs 4,500, there will have been a shortfall of Rs 500, on which the interest charged would be Rs 5 (1 per cent of Rs 500 for a month).

Thus, you end up with a penal interest of Rs 35 for the year. If in the last month, that is March, you delay payment of the last instalment by even a day, you will have to pay interest on the entire balance of Rs 5,000

CA Krishna Chaitanya M (Chartered Accountant) (463 Points)
Replied 03 July 2012

it is company responsible to deduct tds in time ,if tds is not deducted in time, then it is also responsibility of comapny to pay interest u/s 234B for non deduction of tds in advance, so assesse (employee) not responsible to pay interest as well as penalty.

if company not at all deduct tax, then employee responsible to pay tax due, in these circumstance also company only responsible to pay interst u/s 234B as well as penalty.

refer case [ DIT vs Maersk co. Ltd . (2011) (uttarakhand - FB )]

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