Advance Tax Alert: Missed the March 15 Deadline? Avoid S. 234C Penalty with This Option
Did you miss the March 15 advance tax deadline? You can still avoid Section 234C interest by taking action before March 31
Advance Tax Alert – Penalty – Section 234C – taxscan
Advance Tax Alert – Penalty – Section 234C – taxscan
The advance tax deadline for the fourth and final installment — March 15, 2025 — has come and gone. If you’re a salaried employee who has earned additional income during the financial year but missed paying the applicable advance tax, you might assume that interest under Section 234C is now inevitable.
There’s still a way out. Thanks to certain provisions of the Income Tax Act, salaried individuals can legally avoid paying interest under Section 234C and in some cases, Section 234B even after missing the March 15 deadline, provided they act before March 31, 2025.
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What is Advance Tax and Section 234C?
Advance Tax Basics
Every individual whose total tax liability exceeds Rs. 10,000 in a financial year is required to pay advance tax in four instalments. This includes salaried individuals who earn additional income outside of their regular salary, such as:
- Capital gains
- Rental income
- Interest from FDs or savings
- Side business or freelancing income
- Crypto or stock trading gains
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Advance Tax Schedule (Non-Corporate Assessees)
| Instalment | Due Date | Cumulative Tax Payable |
| 1st | 15th June | 15% |
| 2nd | 15th Sept | 45% |
| 3rd | 15th Dec | 75% |
| 4th | 15th March | 100% |
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What is Section 234C?
Section 234C imposes interest for deferment or non-payment of advance tax instalments. Interest is levied at 1% per month on the shortfall amount for each delayed instalment.
Why Salaried Individuals Usually Don’t Pay Advance Tax
Salaried employees typically don’t have to worry about advance tax because their employer deducts TDS (Tax Deducted at Source) monthly from their salary, based on the declarations made at the beginning of the financial year.
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The scenario changes when the employee earns additional income (such as capital gains or rental income) that the employer is unaware of. The TDS deducted only considers the salary component and any additional tax liability resulting from other income must be covered by the employee either by paying advance tax or ensuring the employer deducts additional TDS.
Two Legal Options to Cover Tax on Additional Income
If you have earned additional income and want to avoid interest under Section 234C, there are two ways to ensure compliance:
1. Pay Advance Tax Before March 31
Even if the March 15 deadline is missed, paying advance tax before March 31 can still help avoid 234C interest in many cases especially if the income arose in the last quarter of the financial year.
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2. Declare Additional Income to Employer and Request Higher TDS
An alternative and often overlooked method is to inform your employer about the additional income after March 15 but before March 31 and request them to deduct additional TDS from your March salary.
This approach is completely legal, as permitted under:
- Section 192(3) of the Income Tax Act allows employers to adjust TDS during the financial year.
- Rule 26C requires only a verified declaration from the employee (no specific format mandated).
If executed correctly, this method ensures that the shortfall in tax is covered through TDS, so, preventing the application of Section 234C (and even 234B in some cases).
When Can Employers Refuse Such a Request?
Despite the legal validity, employers may practically decline such requests under certain conditions:
- Payroll already processed: If the March salary has already been processed, they may not accommodate changes.
- Insufficient salary: If the tax to be deducted exceeds the salary payable.
- Internal cut-off policies: Many companies set internal deadlines (e.g., March 10 or 15) to process declarations.
Still, as per experts, there is no law that restricts an employer from deducting additional TDS in March — it is purely a policy or administrative constraint.
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What Happens If You Miss March 31 Too?
If you do not pay advance tax or get additional TDS deducted by March 31, you may face:
- Section 234C interest: For deferment of tax instalments.
- Section 234B interest: If 90% of total tax liability was not paid by March 31, interest at 1% per month is charged until the date of filing your ITR.
So, March 31 is your final opportunity to avoid both interest sections.
Illustration: How to Avoid Section 234C Interest
Suppose:
- Your employer deducted TDS for the salary of Rs. 12 lakhs.
- You earned Rs. 2 lakhs in capital gains in February 2025.
- You didn't pay advance tax by March 15.
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You Have Two Choices:
- Pay the tax on Rs. 2 lakhs (say Rs. 30,000) as self-assessment tax before March 31 → 234C interest can be avoided if the income was unforeseen.
- Declare the Rs. 2 lakhs to your employer before March 31 and ask for additional TDS → If accepted and deducted in March salary, no interest is applicable.
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