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Penalty under 234b and 234c


sanvar (NA)     13 September 2020

sanvar
NA 
 31 points

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Dear all, I am an employee of a private company. As per form 16, company has already deducted my taxes. When I tried to pay taxes online through cleartax website, I also included the amount of bank interest I earned. But I am being fined penalty under 234b and 234c if I enter bank interest. Am I supposed to pay advance tax for that? For example,

Let A =Salaryincome, B =Total savings interest from all bank accounts
C = A + B
Let D =total deductions
E =C - D
F = Total income tax on E
G = Amount of tax deducted by employer
H= F - G

As H > 10,000 , I am being fined penalty under 234b and 234c in cleartax website. 

How can I know that I will be getting that much interest in for a financial year as I can withdraw my money any time. Does it mean that as individual taxpayer, I need to pay advance tax for a financial year? For example for FY2020-2021, should I have paid some random amount as advance tax in April 2020 itself all because I have some bank interest?

avater

Sagar Patel (Tax and Business Consultant)     13 September 2020

Sagar Patel
Tax and Business Consultant 
 809 likes  8865 points

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Yes, required to pay advance tax as per your estimated tax liability, if it's exceed 10,000/-

annu Goyal   13 September 2020

annu Goyal

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As your tax amount is exceeding Rs. 10000 , your advance tax liability arised and Yes, you should pay for FY 2020-21also

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Raj C Doshi (Practising CA)     14 September 2020

Raj C Doshi
Practising CA 
 283 likes  4014 points

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Agree with replies of other members

sanvar (NA)     14 September 2020

sanvar
NA 
 31 points

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Dear all, thank you very much for your kind replies.  I have below doubts
1)For FY2020-21, by which month I should have paid advance tax to avoid penalty for AY2021-22 as it is already september and I was shocked to see the penalty as this something new for me
2)Should I pay some random amount as advance tax?
3)If by any chance I withdraw some amount due to emergency and if the actual income tax is less than 10,000, can I claim refund of the advance tax or will it get carried over for next financial year?
4)Is there any way I can avoid paying advance tax (due to bank interest)?

I humbly request your valuable advice on above 4 queries . Thank you again for your valuable time.

avater

Raj C Doshi (Practising CA)     14 September 2020

Raj C Doshi
Practising CA 
 283 likes  4014 points

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1. The due date for advance tax are 15th June, 15th Sept, 15th Dec and 15th March. You have to pay 15%, 45%,75% and 90% of your estimated final.tax liability

2. No, you should make a rough computation and estimate advance tax liability.

3. The excess amount paid will be refunded back to you once your ITR was that year is filed and processed.


4. No, there is no escape to paying advance tax due to bank Interest unless you keep NIL balance in all your bank accounts.

Once there is a taxable income, the consequential tax cannot be escaped. Ofcourse, there are deductions and exemptions allowed but the maximum deduction of saving bank interest is lower of actual saving bank interest OR Rs.10000 for individuals upto 60 years / Rs. 50000 for individuals above 60 years under sec 80TTA and sec 80TTB.

Regards
CA. Raj Doshi
R C D & Co.
Chartered Accountants
E : raj @ rcdco.in

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sanvar (NA)     14 September 2020

sanvar
NA 
 31 points

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Thank you very much for your replies.

If I understand , I have time till 15 March to pay advance tax. If on 14th March 2021, I calculate my bank interest tax payable and pay tax on 14 March 2021, 
1)will I still be fined for not depositing tax for each quarter (15% before 15th Jun,45% before 15 Sept,75% before 15 Dec)?

2)Will I be fined for each quarter only if again balance tax payable exceeds 10,000 inspite of paying advance tax?

3)Instead of paying advance tax 4 times a year, if I pay between 70 to 90% tax before 15th June 2020 (which is not possible now) itself would there be an issue or is it mandatory to pay 4 times a year at 15%,45%,etc

Requesting your valuable advice

avater

Raj C Doshi (Practising CA)     14 September 2020

Raj C Doshi
Practising CA 
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1. Yes Interest will become payable for
not depositing on earlier due dates.

2. Once your overall tax liability exceeds 10000, so interest will begin for all quarters. It's not 10000 balance tax for every quarter.

3. You can pay lumpsum 90% now itself before 15th Sept to avoid any recurring payments


Interest is an inherent component. Alternatively, if you dont want to worry about advance tax at all, then best suggestion is to ask your employer to deduct TDS on higher side.

e.g If your income other than salary is 1 lakh and your average tax rate including cess is say 25% which comes to 25000

then ask your employer to deduct 2083 tds extra per month.

In that case, all your taxes would get paid on advance basis, and you need not pay any further advance tax.

Interest will also not get payable, if your employer deducts TDS on higher side.

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sanvar (NA)     14 September 2020

sanvar
NA 
 31 points

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Thank you very much Raj for your kind replies. One last question, if I pay 90% tax after 15 September and before 15 March, would that also be ok to avoid the fine? Thanks in advance.

avater

Raj C Doshi (Practising CA)     14 September 2020

Raj C Doshi
Practising CA 
 283 likes  4014 points

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The interest for the period April to Sept is already levied and cannot be undone. However for the period Oct to March,you will be able to avoid if paid earlier.


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