Applicability of interest u/s 234b and 234c in case of 44ad

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 March 2017 Sir,

Please give correct picture regarding whether payment of advance tax applicable for in case of 44AD case? Is the assesse is liable interest u/s 234B and 234C. If so from when it applicable with notification. I hope that I will receive solution as soon as possible.

Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2017 PLEASE GIVE ANY BODY CAN GIVE REPLY SOON.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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14 July 2024 Under Section 44AD of the Income Tax Act, 1961, taxpayers engaged in certain specified businesses can opt for presumptive taxation. Here's how interest under Sections 234B and 234C applies in the context of Section 44AD:

### Section 44AD and Advance Tax

1. **Presumptive Taxation**: Section 44AD allows eligible taxpayers to declare income at a prescribed rate (8% of turnover or gross receipts) without maintaining detailed books of accounts. This is a simplified method aimed at reducing compliance burden.

2. **Advance Tax Liability**:
- **Applicability**: Taxpayers opting for Section 44AD are not required to pay advance tax under normal provisions if they meet certain conditions. They are allowed to pay the entire tax liability (based on presumptive income) by the due date of filing the income tax return for that financial year.
- **Notification**: The Central Board of Direct Taxes (CBDT) has issued notifications exempting taxpayers under Section 44AD from the requirement of paying advance tax. This exemption ensures that taxpayers opting for presumptive taxation are not penalized for not paying advance tax during the year.

### Interest under Sections 234B and 234C

1. **Section 234B**: This section pertains to interest for default in payment of advance tax. It applies when the advance tax paid by a taxpayer (other than those covered under presumptive taxation) is less than 90% of the assessed tax liability for the year. Since taxpayers under Section 44AD are exempt from paying advance tax, Section 234B does not apply to them.

2. **Section 234C**: This section deals with interest for deferment of advance tax. It applies to taxpayers who are liable to pay advance tax and have not paid the required installments on time. Similar to Section 234B, Section 234C does not apply to taxpayers opting for Section 44AD because they are exempt from paying advance tax during the year.

### Conclusion

- Taxpayers opting for presumptive taxation under Section 44AD are not required to pay advance tax.
- Therefore, they are not liable to pay interest under Sections 234B and 234C for non-payment or deferment of advance tax.
- This exemption is provided through specific notifications issued by CBDT, ensuring clarity and compliance for taxpayers availing of Section 44AD.

If you are considering or already opted for Section 44AD, ensure to review the latest notifications and consult with a tax advisor for specific guidance tailored to your situation.

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