ADVANCE TAX

Advance Tax:-   Section 208 of the Income Tax Act, 1961 deals with the provisions of payment of advance tax which provides that every assessee needs to pay advance tax where advance tax payable is more than Rs. 10000/- for all incomes including but not limited to capital gains, winning from lotteries, casual income etc. It is true that income of previous year is taxable in the immediately following assessment year but assessee is required to pay advance tax as per his own computation as per the provisions of section 208 of the said Act.

Exception: –        From AY 2013-14 onwards every senior citizen not having income from Business/Profession is not liable to pay advance tax.

Due Dates of Advance Tax: –       From June 1, 2016 onwards there is no difference between corporate and individual tax assessees regarding dates and percentage of payment of advance tax which is outlined below: –

Up to 15^th June                                                  15% of Advance Tax

Up to 15^th September                                    45% of Advance Tax

Up to 15^th December                                      75% of Advance Tax

Up to 15^th March                                              100% of Advance Tax

Exception: –       

1. Any assessee opting for computing business income u/s 44AD on presumptive basis was not liable to pay advance tax from AY 2011-12 to AY 2016-17. But from AY 2017-18 onwards assessee opting for payment of tax u/s 44AD on presumptive basis is also liable to pay advance but with a rider that the complete 100% advance tax to be paid before 15^th March instead of 4 instalments as mentioned above.
2. In case Capital Gains and Casual Income 100% of the advance tax is to be paid in the quarter in which income arises.
3. In case of new business started during the year the tax will calculated on this income from that quarter in which income started.

Methods of Calculation: –            Government has not prescribed any specific format or method of calculation of advance tax but has given freedom to assessee himself to estimate his current income and pay advance tax accordingly. The assessee, on its own, can revise the estimated income upwards or downwards depending upon the circumstances after payment 1^st/2^nd or even 3^rd instalment.

Delay in payment of Advance Tax: –        Section 234B and 234C deals with provisions for charging of interest for default in payment of Advance Tax.

Section 234B

Any Assessee who is required to pay advance tax as per Section 208 of the Income Tax Act, 1961 but has not paid 90% of assessed tax within the prescribed time limits of instalments as mentioned above then the assessee is required to pay interest @ 1% per month from April 1^st of the Assessment Year to the date of determination of total income u/s 143(1) or where regular assessment is made then up to the date of regular assessment. In simple words

1. if advance tax paid is more than 90% of the assessed tax then no interest
2. but if advance tax paid is less than 90% then interest @ 1% per month or part of month on assessed tax –advance tax paid is to be calculated up to the date of determination of total income u/s 143(1) and in case of regular assessment up to the date of regular assessment.
3. Assessed Tax means tax on total income calculated as per section 143(1) or in case of regular assessment tax determined as per regular assessment as reduced by

• TDS/TCS on income which is considered while calculating total income
• Relief for taxes paid outside India as per section 90 or 91 or 90A (for any specific territory outside India)
• Tax credit claimed u/s 115 JAA or 115JD (Generally known as MAT Credits)

Other Points

1. In the case of Non Resident and Foreign provisions of Section 234B and 234C are not applicable as all payments are being received from Indian Sources and liable for deduction of tax at source.
2. From AY 2012-13 onwards assessee is liable to pay interest u/s 234B/C where TDS was liable to be deducted but have not been deducted by the Payer and advance tax has not been paid by the assessee.

Section 234C

Interest u/s 234C is payable for non/under payment of 4 instalment of advance tax as mentioned above.

Method of Calculation of Interest: –

Up to 15^th June                                                  15% of Advance Tax

Income Tax Act provides that 15% of Assessed Tax needs to be paid before 15^th June. It also provides that if 12% of the Assessed Tax is paid then no need to pay interest but if advance tax paid is less than 12% then interest @ 1% per month will be paid for 3 months (3 months because next installment is due after 3 months) on Assessed Tax minus Advance Tax paid.

Up to 15^th September                                    45% of Advance Tax

45% of Assessed Tax needs to be paid before 15^th September and against this if 36% of the Assessed Tax is paid then no need to pay interest. In case advance tax paid is less than 36% then interest @ 1% per month will be paid for 3 months (3 months because next instalment is due after 3 months) on Assessed Tax minus Advance Tax paid.

Up to 15^th December                                      75% of Advance Tax

75% of Assessed Tax needs to be paid before 15^th December and in case advance tax paid is less than 75% then interest @ 1% per month will be paid for 3 months (3 months because next instalment is due after 3 months) on Assessed Tax minus Advance Tax paid.

Up to 15^th March                                              100% of Advance Tax

100% of Assessed Tax needs to be paid before 15^th March and in case advance tax paid is less than 100% then interest @ 1% per month will be paid for 1 month (1 month because from April onwards interest of Section 234B apply) on Assessed Tax minus Advance Tax paid.