Identify the Act, year and company tax regime
These worked examples apply the Income-tax Act, 1961 to historical years. Section 208 generally requires advance tax if the amount payable under the advance tax provisions is ₹10,000 or more. Under section 209, start with estimated current taxable income and apply the correct rates and admissible reductions. Check tax actually withheld or collected and the statutory proviso to section 209(1)(d) where income has already been paid or credited without deduction or collection. Reconcile the estimate to the return and tax records.
A valid section 115BAA election gives 22% base tax on ordinary income, 10% surcharge and 4% cess, or 25.168%. Check special-rate income and excluded deductions separately. Section 115BAB has different eligibility and tax rules. MAT under section 115JB does not apply to companies that validly exercise those options, under subsection (5A). Under the ordinary regime, verify the financial year used for the ₹400 crore turnover test, the applicable base rate, surcharge and marginal relief. Where MAT applies, compute adjusted book profit and compare tax under the applicable provisions. Rolta India confirms advance tax and interest can apply to MAT.
For tax years beginning on or after 1 April 2026, use the Income-tax Act, 2025 and Finance Act, 2026. The general MAT base rate under amended section 206 is 14%, with separate exceptions. The legacy MAT-credit rules cannot be carried over unchanged: section 206(3) provides a specific route for eligible credit as at 31 March 2026 for qualifying domestic companies exercising the stated options, capped at 25% of the relevant tax in a tax year and subject to the remaining statutory period.
Schedule cumulative payments and test interest separately
| Due date under section 211 | Cumulative target | Section 234C test |
|---|---|---|
| 15 June | 15% | No interest for this date if at least 12%; otherwise 1% for three months on the shortfall from 15%. |
| 15 September | 45% | No interest for this date if at least 36%; otherwise 1% for three months on the shortfall from 45%. |
| 15 December | 75% | 1% for three months on the shortfall from 75%, subject to applicable relief. |
| 15 March | 100% | 1% for one month on the shortfall, subject to applicable relief. |
The 12% and 36% tolerances do not replace the statutory instalment targets. The section 234C computation uses tax due on returned income as defined in that section, rather than an early budget. Qualifying capital gains, specified winnings, income arising under the business head for the first time and qualifying dividend income may be excepted where the related tax is paid as the proviso requires. Dividend deemed under section 2(22)(e) is excluded. Do not apply relief to ordinary shortfalls unrelated to those items.
Section 234B generally applies where advance tax is below 90% of assessed tax, as defined. If triggered, the base is the full deficiency, not just the amount below 90%. Interest is 1% per month or part from 1 April of the assessment year; account for intervening payments and the actual processing or assessment order. Payment by 31 March can count as advance tax even if after 15 March, but does not generally cure the section 234C instalment shortfall. Apply the prescribed rounding to the interest computation.
For the 1961 Act years, under section 115JAA the amount of available MAT credit used is limited by the excess of regular tax over MAT. Consider the actual eligible credit and expiry, and reconcile the computation before calculating interest. Tulsyan NEC concerns admissible MAT credit; it does not permit offset beyond the applicable conditions.
Four worked illustrations
1. Section 115BAA instalments for FY 2023–24
On ₹16 crore ordinary taxable income, 25.168% gives ₹4,02,68,800. Assume eligible TDS of ₹42,68,800 and no other adjustments, so net tax is ₹3.60 crore. Assume returned figures agree.
| Due date | Cumulative target | Cumulative paid | Section 234C interest |
|---|---|---|---|
| 15 June 2023 | ₹54 lakh | ₹30 lakh | Below ₹43.20 lakh tolerance. ₹24 lakh × 3% = ₹72,000. |
| 15 September 2023 | ₹162 lakh | ₹135 lakh | 37.5% exceeds the ₹129.60 lakh tolerance; nil. |
| 15 December 2023 | ₹270 lakh | ₹240 lakh | ₹30 lakh × 3% = ₹90,000. |
| 15 March 2024 | ₹360 lakh | ₹360 lakh | Nil. |
Total interest is ₹1,62,000.
2. MAT exceeds regular tax
For FY 2023–24 assume ₹8 crore normal taxable income at 25%, 7% surcharge and 4% cess, giving ₹2,22,56,000. Assume ₹18 crore book profit under section 115JB at 15%, 12% surcharge on this deemed total income and 4% cess, giving ₹3,14,49,600. Neither calculation needs marginal relief on these assumptions. MAT is higher; no use of the ₹60 lakh historical MAT credit is available under section 115JAA on these facts. After eligible TDS of ₹25 lakh, net advance tax is ₹2,89,49,600.
3. Unexpected capital gain in November 2023
Assume a 25% ordinary corporate rate on ₹4 crore operating income, no MAT or credits, and ₹25 lakh advance tax paid by each of 15 June and 15 September. Ordinary tax is ₹111.28 lakh with 7% surcharge and 4% cess. The company realises a ₹12 crore long-term land gain on 28 November, assumed to be the taxable gain under the historical law. Its base tax is ₹240 lakh at 20%. Adding the ₹100 lakh ordinary base, applying 12% surcharge and 4% cess gives revised tax of ₹396.032 lakh; the change from the original estimate is ₹284.752 lakh. The example assumes no marginal relief.
A December payment of ₹205 lakh would leave cumulative payments at ₹255 lakh, below the revised 75% target of ₹297.024 lakh. To meet that target with ₹50 lakh already paid, pay ₹247.024 lakh in December, then ₹99.008 lakh in March. Recheck eligibility under the section 234C proviso for earlier shortfalls attributable to the capital gain, and keep the ordinary portion separate. This illustration does not assume a fixed interest saving.
4. Section 234B after scrutiny
For AY 2023–24 assume ₹50 lakh returned tax after eligible reductions and ₹46 lakh advance tax, or 92%, exceeding the ₹45 lakh threshold. A section 43B disallowance of ₹30 lakh is one adjustment; assume the assessment computation results in ₹58 lakh assessed tax after eligible reductions. ₹46 lakh is about 79.3%, below the new ₹52.20 lakh threshold. Assuming no intervening payment or other adjustment and regular assessment on 20 December 2024, April 2023 through part of December 2024 is 21 months. ₹12 lakh × 1% × 21 = ₹2.52 lakh. If self-assessment tax was paid earlier, recompute on the time-varying balance.
Frequently asked questions
What if payment is made on 25 March?
It may count as advance tax for the year and affect section 234B, but ordinarily does not cure the 15 March shortfall under section 234C.
Can the AO issue an advance tax order?
Section 210(3) permits an order by the last day of February in the statutory circumstances. If your estimate is lower, check section 210(5) and the prescribed intimation procedure.
What if the receiving bank is closed?
CBDT Circular 676 addresses the immediately following working day where the receiving bank is closed. Check whether the circular applies to the facts and pay ahead of the deadline where possible.
Does a valid section 115BAA election require MAT?
No under section 115JB(5A). Check ordinary and special-rate income, the election, and admissible adjustments separately.
Do expected deductions at source always reduce cash payable?
Apply section 209(1)(d), its proviso and available evidence. Do not assume an amount is deductible from the estimate merely because it appears in a forecast.
What if the challan uses the wrong minor head?
Retain the receipt and use the official correction procedure if eligible. Advance tax normally uses minor head 100; check the current correction window and contact the jurisdictional officer through the prescribed route if the portal cannot process the request.
Sources
- Income-tax Act, 1961: sections 115BAA, 115BAB, 115JAA, 115JB, 207–219 and 234B–234C
- Finance (No. 2) Act, 2024: historical rates and change to capital gains taxation
- Finance Act, 2026: amended MAT provisions
- Income-tax Act, 2025, as amended: sections 206 and 536 and advance tax provisions
- Supreme Court, JCIT v Rolta India Ltd: advance tax on MAT
- Supreme Court, CIT v Tulsyan NEC Ltd: eligible MAT credit and interest
- CBDT Circular 676: receiving bank closed on the deadline
- Income Tax Department: challan correction procedure