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Interest and penalty on advance tax are charges levied by the Income Tax Department when an individual or entity fails to pay advance tax as per the specified schedule. Here's a breakdown:
Interest:
- Under Section 234B: Interest is levied at 1% per month or part of the month on the amount of advance tax due.
- Calculated from the due date of each installment to the date of actual payment.
Penalty:
- Under Section 234C: A penalty is imposed for default in payment of advance tax.
- The penalty amount is equivalent to the amount of interest levied under Section 234B.
To avoid interest and penalty, it's essential to:
- Pay advance tax installments on or before the due dates.
- Ensure accurate calculation of advance tax liability.
- File Form 26C to revise advance tax payment if necessary.
Remember, advance tax is payable in installments, and timely payment is crucial to avoid additional charges. Consult a tax professional if you need assistance with advance tax calculations or payments.