Section 234C of Income tax Act as Proposed by Finance Bill 2016

Section 234C(1) is substituted to accommodate levy of interest uniformly on both corporate and non-corporates.

“(a) an assessee, other than an eligible assessee in respect of the eligible business referred to in section 44AD, who is liable to pay advance tax under section 208 has failed to pay such tax or—

(i) the advance tax paid by such assessee on its current income on or before the 15th day of June is less than fifteen per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five per cent. of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent. of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. per month for a period of three months on the amount of the shortfall from fifteen per cent. or forty-five per cent. or seventy-five per cent., as the case may be, of the tax due on the returned income;

(ii) the advance tax paid by the assessee on the current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one per cent. on the amount of the shortfall from the tax due on the returned income:

Provided that if the advance tax paid by the assessee on the current income, on or before the 15th day of June or the 15th day of September, is not less than twelve per cent. or, as the case may be, thirty-six per cent. of the tax due on the returned income, then, the assessee shall not be liable to pay any interest on the amount of the shortfall on those dates;”;

The Finance Bill, 2016 also proposes to apply section 234C to persons engaged in business and who offer income on presumptive basis under section 44AD of the Act. Such persons have to pay the advance tax on current income on or before 15^th day of March. Failure to pay such advance tax would attract interest under section 234C which is 1% on the amount of short-fall of advance tax from the tax due on the returned income.

It is also proposed that interest under section 234C shall not be chargeable in case of an assessee having income under the head “Profits and Gains of business or profession ” for the first time , subject to the conditions specified.