Did you Miss the Advance Tax Deadline? Pay Before 31st March to Avoid Extra Interest:

Did you Miss the Advance Tax Deadline? Pay Before 31st March to Avoid Extra Interest

As March 15, 2025, was the last date to pay the advance tax for the current FY 2024-25, most of the taxpayers must have adhered to this deadline. However, in case you missed it, you can still take action before the end of the financial year to minimise the impact. If you pay off the due advance tax before March 31, you can avoid additional interest charges under Section 234C. This means that the interest amount you will be paying under Section 234C is less than the interest that you will pay after March 31, 2025. An individual whose total tax liability exceeds Rs.10,000 in a financial year is liable to pay advance tax. If you don’t pay the last quarter's tax by the end of this financial year, you will have to pay additional interest under Section 234B starting from April 1, 2025.

How much interest is charged under Section 234C and how is it calculated?

If you miss the last deadline for paying the fourth installment of advance tax and you pay your advance tax after March 15, 2025, but before March 31, 2025, you will be liable to pay interest under Section 234C. The interest rate is 1% per month or part of the month on the amount of tax that you paid late. Here is how it is calculated: Suppose you have paid 75% of your tax liability of advance tax on or before December 15, 2024. The remaining 25% of the tax had to be paid by March 15, 2025, to complete the total advance tax payment (100% of the tax liability). However, you paid it on March 17 (2 days late). In this case, the interest at 1% shall be applicable on this shortfall for 1 month. According to an expert, if you do not have enough money to pay the advance tax in full amount, the expert suggests paying whatever you can manage by March 15. By doing this, you can reduce the interest cost that you’d otherwise pay under Section 234C for any late payments. The interest is calculated based on the amount of tax that’s deferred or paid after the due date, so paying a part of it before the deadline helps reduce the total amount of interest you’ll owe.

What if you pay the due tax after March 31, 2025?

If, by March 31, 2025, you have not paid at least 90% of your total tax liability (after considering your advance tax payments), the tax department will impose interest under Section 234B. As stated on the website of the Income Tax Department, the interest is calculated at 1% per month (or part of a month) starting from April 1 of the assessment year until the date when the total income is determined under Section 143(1). This interest applies to the amount by which the advance tax paid falls short of the assessed tax. Therefore, taxpayers need to ensure that the interest under Section 234B is calculated correctly when filing the ITR. Advance tax can only be paid during the financial year. So, if you pay any tax after March 31, it would not be treated as advance tax but as, self-assessment tax.