SAVE INTEREST ON PAYING YOUR ADVANCE TAX

You can still save some INTEREST on paying your ADVANCE TAX by 31st March, 2024. This is only applicable if your advance tax liability exceeds Rs. 10k. Interest for not paying advance tax on time is levied under two sections:

1. Section 234B - (1% Interest per month is levied if 90% of assessed advance tax is not paid by 31st March 2024 and interest is charged from assessment year i.e. April 2024)

2. Section 234C - (Levied if advance tax is not paid in prescribed percentages quarterly) Let's discuss two hacks by which you can plan and save some interest now as well.

"SAVE YOUR INTEREST ON ADVANCE TAX - HACK 1"

Let's understand it with an example Say, for FY 23-24, your total tax liability is roughly 5 Lakhs and TDS/TCS of Rs. 3 Lakhs is already deducted. So, your resultant advance tax liability from the above equation comes to Rs. 2 Lakhs. Interest for not paying advance time on time quarterly will be calculated on this 2 Lakh. Now, ask your employer to deduct higher TDS for the month of March 2024 and pay you less "in-hand" salary, so that your resultant advance tax liability is less and accordingly, the interest chargeable on quarterly instalments can be brought down. So, if the employer deducts an extra TDS of 1.5 Lakhs from above, your advance tax liability will now be 50k instead of 2 Lakhs. So, quarterly interest will be levied on 50k rather than 2 Lakhs. This will significantly cut down your interest under section 234C wherein you were required to pay advance tax quarterly up to 15%, 45%, 75% and 100% by 15th June, 15th September, 15th December and 15th March. Similarly, it will reduce your tax liability under section 234B as well wherein if you don't pay your advance tax by year-end, 1% is charged every month from the start of the assessment year i.e. April 2024. So, in this example, instead of interest of Rs. 2000 per month, you will only pay Rs. 500 under section 234B

"SAVE YOUR INTEREST ON ADVANCE TAX - HACK 2"

Now, suppose, if your employer does not agree to deduct additional TDS as mentioned above and your advance tax liability is Rs. 2 Lakhs. Then, in this case, you cannot save any interest on the shortfall relating to quarterly instalments i.e. under section 234C but you can pay at least 90% of 2 Lakhs i.e. 1.8 Lakhs as advance tax by 31st March 2024 and you will be charged no interest under section 234B i.e. 1% per month from April 2024 onwards till you pay your tax in full along with filing of income tax return. So, if you pay now before 31st March 2024, you will save Interest of Rs. 8000 (2000*4 months) assuming you would have paid & filed ITR by July 2024 which is the original due date for filing an income tax return for FY 23-24 (AY 24-25) for non audit assesses.