# Special Relief for Capital Gains & Casual Income — Proviso to Section 234C

## The Problem

Advance tax is payable on total income, which includes capital gains and casual income (lottery, crosswords, card games, races, etc.).

But these incomes are unpredictable — an assessee cannot estimate them at the start of the year.

## The Relief Provided

The proviso to section 234C provides:

> If any such income arises after the due date for any advance tax instalment, then the entire tax payable on such income (after considering TDS) should be paid in the remaining instalments of advance tax which fall due.

> If no further instalment is due, the entire tax should be paid by 31st March of the relevant financial year.

## Effect

No interest under section 234C is leviable on shortfall in the earlier instalments attributable to such income.
This relief applies only to the late-arising capital gains / casual income — NOT to regular business or salary income.

## Special Note on Casual Income

Casual income is fully subject to TDS @30% under sections 194B / 194BA / 194BB. Therefore, advance tax liability arises only if:

Surcharge (if any) + Health & Education cess @4% on such income, PLUS
Tax liability on other income, if any,

is ₹10,000 or more.

Worked example

### Example 1

Example: Mr. X earns long-term capital gains of ₹10 lakh on 20th February 2026 (after the December instalment due date). His tax liability on this LTCG (after TDS) is ₹1,00,000.

Solution:

Only the 15th March instalment remains.
Entire ₹1,00,000 must be paid by 15th March 2026 to escape 234C interest on this component.

### Example 2

Example: Mr. Y wins a lottery of ₹5,00,000 in November 2025. Tax of ₹1,50,000 has been deducted u/s 194B @ 30%. He has no other income.

Solution:

Entire tax is already covered by TDS.
Cess: ₹6,000 (4% × ₹1,50,000)
Net advance tax payable = ₹6,000 < ₹10,000 ⇒ No advance tax liability.

⚠️ Common exam mistakes

Charging 234C interest on the earlier missed instalments for capital gains that arose later — the proviso shields these.
Forgetting that surcharge/cess on casual income is still payable as advance tax even when 30% TDS covers basic tax.
Pushing the entire late-arising income's tax to 31st March even when intermediate instalments are still due — the law says 'in the REMAINING instalments'.

Bare-Act text Proviso to 234C · Income-tax Act, 1961 · click to expand

If any such income (capital gains or casual income like lotteries, crossword puzzles, etc.) arises after the due date for any instalment, then, the entire amount of the tax payable (after considering tax deducted at source) on such capital gains or casual income should be paid in the remaining instalments of advance tax, which are due. Where no such instalment is due, the entire tax should be paid by 31st March of the relevant financial year. No interest liability on late payment would arise if the entire tax liability is so paid.

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Proviso to Section 234C - Advance Tax on Capital Gains & Casual Income

Worked example

⚠️ Common exam mistakes