Income tax hack: Do this by 31 March to avoid interest on advance tax shortfall

Imagine realizing in March that you owe additional taxes—plus interest—because you missed your advance tax payments. For many salaried individuals earning extra income from fixed deposits, stocks, or rental properties, this is a costly oversight. 

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While employers deduct tax at source (TDS) on salaries, they don’t account for other sources of income unless explicitly informed. The good news? A simple declaration to your employer before the financial year ends can help you avoid unnecessary penalties under Section 234C of the Income Tax Act. Here’s how it works and why timing matters.

Under Indian tax laws, if your total tax liability exceeds ₹10,000 in a financial year, you must pay advance tax in installments—15% by June 15, 45% by September 15, 75% by December 15, and 90% by March 15. Any shortfall attracts interest under Section 234C.

For salaried employees, this usually isn’t a concern since their employer deducts tax at source each month. Senior citizens without business income are also exempt. However, many salaried individuals earn additional income from sources like bank interest, rental income, dividends, or even stock market trading. 

If the TDS deducted by the employer doesn’t cover the tax liability on this extra income, the employee must pay advance tax—or risk incurring interest.

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“You can report any additional income you have earned to your employer by March. Your employer will deduct TDS on this income also and this can save you from payment of interest under Section 234C on unpaid advance tax," said Prakash Hegde, a Bengaluru-based chartered