Can You Pay Advance Tax on June 16 Without Penal Interest?

A common question among taxpayers for first installment of advance tax for FY 2025-26 be paid on June 16, 2025 due to holiday on 15th June, , without attracting penal interest provision of I.T. Act, 1961?This issue, while seemingly simple, touches on an important intersection of tax law, administrative circulars, and the evolution of electronic payment systems by Chartered Accountants in udaipur.

With June 15, 2025, falling on a Sunday, a common question among taxpayers is: Can the first installment of advance tax for FY 2025-26 be paid on Monday, June 16, 2025, without attracting penal interest under Sections 234B and 234C of the Income-tax Act, 1961?

What Does the Law Say About Advance Tax?

Advance tax is a system of “pay-as-you-earn” introduced to ensure a continuous flow of revenue to the government and to avoid a lump-sum payment at the end of the financial year. Under Section 211 of the Income-tax Act, the due dates for advance tax installments are:

• June 15: 15% of total advance tax
• September 15: 45% of total advance tax (cumulative)
• December 15: 75% of total advance tax (cumulative)
• March 15: 100% of total advance tax

If a taxpayer fails to pay the appropriate installment by the due date, interest is levied under Sections 234B and 234C.

The CBDT Circular No. 676 of 1994

To address situations where the due date falls on a non-working day, the CBDT issued Circular No. 676 on January 14, 1994, which states:

“If the last date for payment of any instalments of advance tax is a day on which the receiving bank is closed, the assessee can make the payment on the next immediately following working day. In such cases, the mandatory interest leviable under sections 234B and 234C of the Income-tax Act, 1961 would not be charged.”

This circular is critical in providing relief to taxpayers when due dates coincide with bank holidays.

So, What Happens on June 15, 2025?

Scenario:

• June 15, 2025 (Sunday) is the first due date for advance tax.
• Banks and most government offices will be closed.
• Taxpayers may plan to pay on Monday, June 16, 2025.

Applicability of CBDT Circular:

The 1994 circular clearly provides relief if the receiving bank is closed. Thus, a payment made on the next working day, i.e., June 16, should not attract penal interest.

However, There’s a Twist: The Digital Era Argument

The tax department may argue that since electronic payment systems are now fully operational 24/7, taxpayers can still make advance tax payments online even on Sundays.

This raises the question:

Does the 1994 circular still apply in an era where e-payments are possible even on holidays?

While the circular hasn’t been officially withdrawn or modified, there is ambiguity. Some assessing officers might argue that the availability of e-payment facilities nullifies the rationale behind the circular.

Practical Recommendation

Until there’s official clarification from the CBDT or judicial precedent on this matter in the e-payment context, here’s what taxpayers should do:

• Best Practice: Pay your first installment by Saturday, June 14, 2025, to avoid any possible dispute or interest levy.
• If Paying on June 16: Retain clear records of the bank closure on June 15 and cite CBDT Circular No. 676 if any query arises.

Final Thoughts

While the CBDT circular of 1994 does provide a safety net, the increasing reliance on electronic payment systems has blurred the line between “bank holidays” and functional payment days. Until this issue is definitively addressed by the authorities, taxpayers are advised to err on the side of caution.

If you’re unsure or your payment timing is tight, consult Chartered Accountants in udaipur well in advance.