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Brief about Advance Tax

March 6, 2019 July 09, 2016 Admin
  • Tax shall be payable in advance during any financial year, in accordance with the     provisions of sections 208 to 219 of Income Tax Act, 1961, in respect of an assessee’s estimated income. For Example if the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year [Section 207].
  • Under section 208, obligation to pay advance tax arises in every case where the advance tax payable is ` 10,000 or more.
  • In case of senior citizens who have passive source of income like interest, rent,       etc., the burden on such senior citizens, exemption from payment of advance tax has now been provided to a resident individual-
    • not having any income chargeable under the head “Profits and gains of business or profession”; and
    • Of the age of 60 years or more.

Such senior citizens need not pay advance tax and are allowed to discharge their tax liability by payment of self-assessment tax.

Computation of advance tax

  • An assessee has to estimate his current income and pay advance tax thereon.
  • Where an obligation to pay advance tax has arisen, the assessee shall himself compute the advance tax payable on his current income at the rates in force in the financial year and deposit the same.
  • For this purpose, the total income of the latest previous year, shall be taken as the basis for computation of advance tax payable.
  • In all cases, the tax calculated shall be reduced by the amount of tax deductible at source.

Instalments of advance tax and due dates

Common advance tax payment schedule for both corporates and non- corporates (other than assessee computing profits on presumptive basis under section 44AD(1) or section 44ADA(1)):

Due date of instalment Amount payable
On or before 15th June Not less than 15% of advance tax liability
On or before 15th September Not less than 45% of advance tax liability, as reduced by the amount, if any, paid in the earlier instalment.
On or before 15th December Not less than 75% of advance tax liability, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments.
On or before 15th March The whole amount of advance tax liability as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments.

Note – Any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during each financial year on or before 15th March

*Assessee computing profits on presumptive basis under section 44AD(1)or section 44ADA(1)to pay advance tax by 15th March

Interest for non-payment or short-payment of advance tax [Section 234B]

  • Interest under section 234B is attracted for non-payment of advance tax or payment of advance tax of an amount less than 90% of assessed tax.
  • The interest liability would be 1% per month or part of the month from 1st April following the financial year upto the date of determination of income under section 143(1).
  • Such interest is calculated on the amount of difference between the assessed tax and the advance tax paid.
  • Assessed tax is the tax calculated on total income less tax deducted or collected at source.
  • However, where self-assessment tax is paid by the assessee under section 140A or otherwise, interest shall be calculated upto the date of payment of such tax and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.

 

Interest payable for deferment of advance tax [Section 234C]

Specified date Specified % Shortfall in advance tax Period
(1) (2) (3) (4)
15th June 15% 15% of tax due on returned income (-) advance tax paid up to 15th June 3 months
15th September 45% 45% of tax due on returned income (-) advance tax paid up to 15th September 3 months
15th December 75% 75% of tax due on returned income (-) advance tax paid up to 15th December 3 months
15th March 100% 100% of tax due on returned income (-) advance tax paid up to 15th March 1 month

In case an assessee who declares profits and gains in accordance with the section 44AD(1) or section 44ADA(1), as the case may be, who is liable to pay advance tax under section 208 has failed to pay such tax or the advance tax paid by the assessee on its current income on or before 15th March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of 1% on the amount of the shortfall from the tax due on the returned income.

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