Is It Fair To Discriminate TDS Unfairly Over Advance Tax? The Curious Case Of Section 234B Of The Indian Income Tax Act

BACKGROUND

Section 234B of the Income Tax Act was introduced in the year 1988; It seeks to levy interest for non-payment of advance tax or payment of advance tax of an amount less than ninety percent of assessed tax.

However, Section 208 obligates the assessee to make payment of advance tax if the amount of advance tax payable is ₹10,000 or more. It defines the methodology of computing the advance tax and it gives credence to deduction of TDS while computing the advance tax to be paid.

It is further provided in Section 234B that where the pre assessment taxes (that is, total taxes paid during the financial year, prior to assessment that happens after the end of the Financial Year) paid are above 90 per cent of the finally assessed tax, no interest is leviable.

Also, Explanation 1 to Section 234B (extracted below) requires that TDS should be deducted while computing the advance tax payable as it recognises that TDS is part of the pre assessment tax.

[Explanation 1. - In this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,1-any tax deducted or collec