As per Income Tax Act,
- Individual should pay income tax periodically for financial year.
- Total tax payable should be paid by end of financial year (before 31-March).
- Income Tax Return should be filled within time frame (31-July) for previous financial year.
If delayed in any of above, individual needs to pay interest / penalty on income tax payable to Income Tax Department.
If Individual is salaried then employer deduct income tax from employee's salary deposit it to Income Tax Department periodically / every month on behalf of employee.
In case of individual have fixed deposit(s) in bank(s) then bank should pay income tax (to Income Tax Department) on interest of FD(s) - if applicable and deduct that amount from interest payable to customers.
Section 234C: Interest penalty for delay in periodic payment of income tax
As per this section, individual should their income tax periodically in below manner:
- 30% of total income tax should be paid by 15-September of financial year.
- 60% of total income tax should be paid by 15-December.
- 100% should be paid by 15-March.
If any delay in payment of income tax in above manner then individual are liable to pay interest / penalty under this section 234C as below:
- If tax paid by 15-September is less than 30% of total income tax payable then 1% interest per month on difference (30% of total tax - tax paid) for 3 months.
- If tax paid by 15-December is less than 60% of total income tax payable then 1% interest per month on difference (60% of total tax - tax paid) for 3 months.
- If tax paid by 15-March is less than total income tax payable then 1% interest on total outstanding tax.
For example: Individual's total income tax payable is 20,000/- for whole financial year, so individual should deposit:
- 30% - 6,000/- till 15-September.
- 60% - 12,000/- till 15-December.
- 100% - 20,000/- till 15-March.
Now if individual deposited / paid:
- 5,000/- on 1-September,
- 5,000/- on 1-December,
- 8,000/- on 1-March &
- remaining 2,000/- on 20-March.
Interest / penalty calculated under this section as below:
- On 15-September, difference is 1,000/- (6,000 - 5,000), so penalty will be 30/- (1% on 1,000 [difference on 15-September] for 3 months).
- On 15-December, difference is 2,000/- (12,000 - 10,000), so penalty will be 60/- (1% on 2,000 [difference on 15-December] for 3 months).
- On 15-March, difference is 2,000/- (20,000 - 18,000), so penalty will be 20/- (1% on 2,000 [difference on 15-March] for 1 month).
So total penalty under this section 234C is 110/- (30 + 60 + 20).
Section 234B: Interest penalty for incomplete payment of income tax
As per this section, individual should pay at least 90% of their income tax payable by end of the financial year (means before 31-March). If on 31-March, balance tax payable is more than 10% then individual are liable to pay penalty of 1% per month on balance income tax amount from 1-April of assessment year.
For example: Individual total tax payable is 20,000/- for whole financial year, so individual should deposit 18,000/- before end of financial year.
Now if individual deposited / paid 17,000/- till 31-March then should pay penalty on balance income tax (3,000/-):
- 30/- (1% on 3,000/- for one month) if will pay due income tax till 30-April.
- 60/- (1% on 3,000/- for two month) if will pay due income tax till 31-May.
- 90/- (1% on 3,000/- for three month) if will pay due income tax till 30-June.
- 120/- (1% on 3,000/- for four month) if will pay due income tax till 31-July and so on.
Section 234A: Interest penalty for delay in filing income tax return
As per this section, individual should pay their income tax payable and file income tax return before 31-July of assessment year for previous financial year. If income tax return filled after this date (31-July) then individual are liable to pay penalty 1% interest on balance income tax per month.
For example: Individual total tax payable is 20,000/- for whole financial year, so individual should deposit 20,000/- and file income tax return for 31-July of assessment year.
For example: Individual total tax payable is 20,000/- for whole financial year, so individual should deposit 20,000/- and file income tax return for 31-July of assessment year.
Now if individual deposited / paid 17,000/- till 31-March then should pay penalty on balance income tax (3,000/-):
- 30/- (1% on 3,000/- for one month) if will pay due income tax & file income tax return till 31-August.
- 60/- (1% on 3,000/- for two month) if will pay due income tax & file income tax return till 30-September.
- 90/- (1% on 3,000/- for three month) if will pay due income tax & file income tax return till 31-October.
- 120/- (1% on 3,000/- for four month) if will pay due income tax & file income tax return till 31-October and so on.
Note: While paying balance, income tax individual should include penalties liable under above sections.
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